TMI Tax Updates - e-Newsletter
February 14, 2025

Case Laws in this Newsletter:

GST Income Tax Customs PMLA Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. Foreign Trade Policy Exemption Schemes: A Complete Guide for Exporters

   By: Pradeep Reddy

2. Navigating GST on Rental Income: Key Rules, Exemptions & Compliance

   By: RAHUL MODI

3. This may reduce your tax liability or lead to a refund if excess tax is deducted.

   By: Ishita Ramani

4. Understanding Dark Patterns

   By: YAGAY andSUN

5. CONSEQUENCES OF NON-FILING/DELAYED FILING OF INCOME TAX RETURNS

   By: DR.MARIAPPAN GOVINDARAJAN

6. Service Tax is not chargeable on reimbursement of expenses

   By: Bimal jain

7. Practice Support:Deletion of penalty u.s. 271.1. c led to deletion of additions by the Supreme Court which was earlier confirmed in assessment and appeals against assessment order.

   By: DEVKUMAR KOTHARI and CA UMA KOTHARI

8. Tug of war Between “Free” and “Restricted” Export Policy in Context with Granting of Export Incentive i.e. RODTEP

   By: YAGAY andSUN

9. An Interesting Scenario (Hypothesis) to Minimize adverse impact of Climate ChangeHow much Fuel and Foreign Currency, India can save if 10% Motor Vehicle (Cars & Motorcycles/Scooters) Riders commute through Bicycle by covering a distance of 15 km daily (on an average) and its' impact on our Environment.

   By: YAGAY andSUN

10. Key Initiatives by Ministry of Commerce & Industry for Promotion of Export of Plastic and Articles thereof.

   By: YAGAY andSUN

11. CARGO VOLUME HANDLED BY INDIAN PORTS

   By: YAGAY andSUN

News

1. Driver of Meerut CGST officials caught accepting bribe on their behalf

2. Advisory for GST Registration Process (Rule 8 of CGST Rules, 2017)

3. DGGI probe detects Rs 1,196 cr fraudulent Input Tax Credit transactions

4. NDA will get 400 seats in the next Lok Sabha polls: Athawale

5. Budget's goal is to propel growth, boost private investments: FM Sitharaman in RS

6. Development of last man, last village is the philosophy of Budget: Bhubaneswar Kalita

7. MCD presents Rs 17,000 crore budget for next financial year

8. Opposition stalls Kerala Assembly, accuses speaker of interruption amid SC/ST budget cut protest

9. Focus on revenue outlay over capex in Bengal budget indicates populism tilt in election yr: Experts

10. State’s tax revenue increased from Rs 1,450 crore in 2018 to Rs 3,217 crore: Meghalaya CM

11. Union Budget historic, even opposition couldn't criticise: Prasada

12. Mamata govt tables Rs 3.89 lakh cr budget; hikes DA & focuses on rural development in pre-poll year

13. Bengal budget allocates Rs 1,091 crore for forest dept, Sunderbans Affairs

14. UP govt not releasing correct death toll in Maha Kumbh stampede, alleges Mamata

15. Bengal pegs fiscal deficit at 3.6pc, projects 11.94pc nominal GDP growth: Amit Mitra for 2025-26

16. Bengal allocates Rs 1.18 lakh crore for gender budget, Rs 59,000cr for child welfare in 2025-26

17. Bengal Inc lauds state budget for 2025-26

18. Odisha CM inaugurates 'Digital House' for paperless Assembly ahead of budget session

19. Income-tax Bill, 2025, tabled in Parliament today towards achieving comprehensive simplification of the Income-tax Act, 1961

20. Income Tax Bill aims to achieve tax certainty, minimise fresh interpretation: I-T dept

21. ​Income-tax Bill, 2025

22. 'Vindictive, inhuman conduct, low conviction': When ED came under court scanner

23. Ensure fair treatment to customers: RBI Guv Malhotra to NBFCs

24. ED arrests 2 in PMLA case against betting portal

25. West Bengal Government unveils Unlocking MSME Export Potential report prepared by Dun & Bradstreet in collaboration with MSME & Textile Department

26. New Income Tax bill introduced in LS; govt asks speaker to refer it to select committee of House

27. SC pulls up ED for using PMLA to keep accused in jail

28. Trump readies matching tariffs on trade partners, possibly setting up a major economic showdown

29. Govt lists Income-Tax Bill, 2025 for introduction in LS on Thursday

30. RBI lifts curbs on Kotak Mahindra Bank; allows lender to issue fresh credit cards

31. West Bengal achieved growth through fiscal discipline: Economic Review

32. Arunachal Guv advocates cultural and economic ties with UP

Notifications

Companies Law

1. G.S.R. 131(E) - dated 12-2-2025 - Co. Law

Companies (Prospectus and Allotment of Securities) Amendment Rules, 2025

Income Tax

2. 16/2025 - dated 12-2-2025 - IT

Exemption from specified income U/s 10(46A) of IT Act 1961 – Real Estate Regulatory Authority, Punjab

Circulars / Instructions / Orders

FEMA

1. 20 - dated 13-2-2025

Export-Import Bank of India’s GOI-supported Line of Credit of USD 180 mn to the Government of the Socialist Republic of Vietnam for procurement of 4 Offshore Patrol Vessels (OPV) in the Borrower’s Country

2. 21 - dated 13-2-2025

Import Bank of India’s GOI-supported Line of Credit of USD 120 mn to the Government of the Socialist Republic of Vietnam (GO-VNM) for procurement of High-Speed Guard Boats in the Borrower’s Country

DGFT

3. 48/2024-25 - dated 12-2-2025

Procedure for Allocation of Quantities for import of Calcined Petroleum Coke for Aluminium Industry and Raw Petroleum Coke for CPC manufacturing industry, for the Financial Year 2025-26

4. Trade Notice No. 30/2024-2025 - dated 12-2-2025

Procedure for filing application for allocation of Tariff Rate Quota (TRQ) of Gold Bullion under India-UAE CEPA for FY 2025-26

Highlights / Catch Notes

GST

• GST Reassessment Challenge Fails as Section 107A Appeal Provides Adequate Remedy; 30 Days Given for Statutory Appeal

  Case-Laws - HC : HC dismissed writ petition challenging GST reassessment order, holding that statutory appeal under Section 107A GST Act provides adequate remedy. Court emphasized established principle that writ jurisdiction cannot be invoked when statutory remedies exist, absent exceptional circumstances. Petitioner's claims of natural justice violations and denial of witness cross-examination were directed to appellate forum. Court granted petitioner 30 days from judgment date to file statutory appeal, ensuring preservation of appellate rights despite writ dismissal. Dismissal was without prejudice to merits, allowing full ventilation of grievances through prescribed appellate mechanism.
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• Registration Under GST Cannot Be Denied Based On Applicant's Non-Residency Status, Constitutional Right To Trade Must Be Protected

  Case-Laws - HC : HC overturned rejection of sales tax registration application, ruling that non-residency in Andhra Pradesh cannot be grounds for denial under APGST Act. The court emphasized fundamental rights under Art. 19 guaranteeing citizens' freedom to conduct business anywhere in India. Despite authorities' concerns, rejection based on applicant's out-of-state status lacks statutory basis. The court directed immediate registration, affirming that geographical restrictions absent in legislation cannot impede constitutional right to trade. Order dated 04.11.2024 vacated with instructions to process registration under APGST Act.
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• Bank Accounts Remain Frozen After Evidence Shows Rs.12.33 Crore GST Fraud Through Fake Bills Under Section 83

  Case-Laws - HC : HC upheld provisional attachment orders under Section 83 of Gujarat GST Act 2017 against petitioner's bank accounts. Evidence revealed petitioner's involvement in issuing fraudulent bills and wrongful input tax credit claims, with estimated liability of Rs.12.33 crores. Court found legitimate grounds for attachment renewal after initial one-year period, distinguishing from RHC Global Exports precedent. Petitioner's modus operandi involved selling high-value goods without invoices while claiming ITC on lower-value items. Court determined no breach of Section 83, as attachment served to protect revenue interests during ongoing investigation involving ITC fraud exceeding Rs.18.97 crores. Petition dismissed, allowing continued attachment of bank accounts.
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• Input Tax Credit Denied: Taxpayers Failed to Prove Actual Receipt of Goods Under GST Section 16(2)(b)

  Case-Laws - HC : HC upheld denial of input tax credit (ITC) under GST law. Petitioners failed to demonstrate actual receipt of goods and legitimacy of transactions with suppliers. Court emphasized that while Section 7's definition of supply is broad, valid ITC claims must satisfy Section 16(2)(b) requirements. Despite petitioners' argument regarding denied cross-examination of suppliers, HC ruled this wasn't a violation of natural justice. Key findings centered on petitioners' failure to maintain proper documentation, including e-way bills for goods valued over Rs.50,000, and inability to prove physical receipt of goods. Per Rule 36 and Section 16(2), burden of proving valid receipt lies with recipient. Without meeting these statutory requirements, provisional credit must be reversed. Petition dismissed.
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• Input Tax Credit Utilization From Different GST Heads Not Wrongful Under Section 16(2)(c), Orders Fresh Assessment

  Case-Laws - HC : HC ruled in favor of the petitioner regarding input tax credit (ITC) dispute under GST law. The court established that electronic credit ledger functions as a pool of funds with separate compartments for IGST, CGST, and SGST. Although petitioner utilized CGST and SGST credits instead of IGST, this did not constitute wrongful availment under Section 16(2)(c) of GST Act. Court set aside proceedings initiated under Section 73 of CGST Act, directing reconsideration of original orders. The ruling affirms that mere utilization of different tax head credits does not amount to improper ITC claim when overall credit pool is legitimate. Matter remanded for fresh consideration by tax authorities.
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• Employers Can Claim GST Refund on Notice Pay Recovery Within Two Years of Circular 178/10/2022 Under Section 54

  Case-Laws - HC : HC determined that GST refund claims on notice pay recovery were not time-barred under CGST Act Section 54. Following Circular No. 178/10/2022-GST, notice pay recovery by employers was deemed non-taxable due to absence of service supply. The two-year limitation period for refund claims commenced from the circular's issuance date (03.08.2022), making claims filed on 05.11.2022 and 07.11.2022 valid. Court emphasized that GST paid through self-assessment, when not legally required, must be refunded as per constitutional principles under Article 265. State cannot retain unauthorized tax collections, constituting unjust enrichment. Petition granted, directing refund of GST collected on notice pay recovery.
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Income Tax

• Time Limits Under Section 144C(13) Are Mandatory: AO Must Complete Assessment Within One Month of DRP Directions

  Case-Laws - HC : HC ruled that time limits under Section 144C(13) for completing assessments following DRP directions are mandatory, not directory. The AO must pass orders within one month from the end of the month in which DRP directions are received. This limitation period cannot be counted from when the Transfer Pricing Officer implements DRP directions. The assessment order dated February 27, 2015, was held time-barred as it exceeded statutory limits. The court emphasized that limitation laws provide certainty and finality to tax proceedings, preventing indefinite litigation exposure. Following precedent in Vodafone Idea Limited, the court affirmed the mandatory nature of Section 144C(13) timelines and ruled in the assessee's favor, stressing strict adherence to prescribed time limits.
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• Transfer Pricing Adjustments Deleted: Expat Salary Reimbursements and Royalty Payments Found Valid Under ALP Analysis

  Case-Laws - HC : HC upheld ITAT's decision deleting transfer pricing adjustments related to expatriate salary reimbursements and royalty payments. The court rejected TPO's contention that ALP should be nil due to assessee's losses, emphasizing that business losses do not negate the value of services or technical know-how. For expatriate costs, court noted these were pure reimbursements without markup and were subsumed in commission earnings already found arm's length under TNMM. Regarding royalty, HC affirmed that technical know-how procurement was a commercial decision outside TPO's review scope. Revenue's allegation of double deduction was dismissed for lack of substantiation. The court found no basis to interfere with ITAT's conclusions on both issues.
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• Tax Authority's Pre-Resolution Period Refund Adjustment Valid; Resolution Applicant Cannot Claim AY 2010-11 Tax Returns

  Case-Laws - HC : HC affirmed tax authority's adjustment of AY 2010-11 refund against pre-existing tax liabilities of corporate debtor. Resolution applicant's claim to refund rejected on dual grounds: first, the adjustment effectively reduced tax dues already considered in approved resolution plan; second, resolution applicant's rights commenced only from plan approval date (November 7, 2017), precluding claims to pre-resolution period tax refunds. Court determined resolution applicant could not assert rights over tax assessments and resultant refunds from AY 2010-11, as these predated their assumption of corporate debtor's management. Challenge to adjustment procedure dismissed despite notice argument.
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• Income Tax Reassessment Notice Under Section 147/148 Quashed Due To Prior Full Disclosure Of Interest-Free Group Loans

  Case-Laws - HC : HC quashed reassessment notice under s.147/148 of Income Tax Act concerning interest-free loans to related entities and interest claims on borrowed funds. The assessee had made complete disclosure in original returns filed on 29.09.2013 including balance sheet and P&L statements. RTI documents revealed AO had formed opinion on interest-free group loans during original assessment concluded on 29.06.2015. Court found no failure by assessee to disclose material facts necessary for assessment. The subsequent reopening was unwarranted as AO had previously justified original assessment conclusions in response to audit objections. Notice dated 28.03.2021 and speaking order dated 29.07.2021 were held unsustainable.
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• Reassessment Order Under Section 148A(d) Invalid Due to Wrong Authority's Approval for Beyond 3-Year Cases

  Case-Laws - AT : ITAT determined the assessment order under s.148A(d) for AY 2018-19 was invalid due to improper sanctioning authority approval. The order issued on 06.04.2022 received approval from Principal Commissioner of Income Tax (PCIT) instead of the statutorily required Principal Chief Commissioner of Income Tax (PCCIT), as mandated by s.151 for cases beyond three years from assessment year end. Following precedent in Holiday Developers case, ITAT held that PCCIT approval was mandatory since the order fell outside the three-year window. Consequently, both the s.148A(d) order and subsequent s.148 notice were quashed, ruling in assessee's favor due to jurisdictional defect in sanctioning authority.
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• Taxpayer's Section 80JJAA Deduction Claim in Revised Return Valid if Form 10DA Filed During Assessment Proceedings

  Case-Laws - AT : ITAT allowed taxpayer's appeal regarding deduction claim under Section 80JJAA made in revised return. While AO rejected the claim solely due to timing of revised return filing, ITAT held that once revised return is accepted, all deductions claimed therein must be considered. Following SC precedent in G.M Knitting Industries, submission of prescribed Form 10DA during assessment proceedings constitutes valid compliance. Matter remanded to AO for verification of other eligibility conditions under Section 80JJAA and quantification of deduction amount. Appeal allowed for statistical purposes with direction to examine substantive qualification criteria rather than rejecting claim on procedural grounds.
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• Pen Drive Evidence Valid, Cash Receipt Rates Modified, R&D Deductions Under Section 35(2AB) Partially Allowed

  Case-Laws - AT : ITAT addressed three key issues in this tax appeal. The tribunal upheld the addition of undisclosed income based on electronic evidence from a seized pen drive, as proper certification under Section 65B(4) of Indian Evidence Act was obtained. Regarding unaccounted cash receipts, ITAT modified CIT(A)'s approach of applying 85% blanket rate, directing reassessment based on the assessee's declared net profit rates for respective years. On R&D deductions under Section 35(2AB), the tribunal confirmed that post July 2016, deductions must align with DSIR quantification, except for AY 2016-17 where full revenue expenditure deduction was allowed. The tribunal also upheld CIT(A)'s deletion of Section 69C additions after verifying opening cash balances from seized documents.
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• Agricultural Land Sale Exemption Under Section 54B Granted After Proving Cultivation History and Proper Reinvestment

  Case-Laws - AT : ITAT upheld taxpayer's claim for exemption under section 54B regarding capital gains from sale of agricultural land. Evidence showed consistent agricultural income in previous years, including Rs. 14,000 for AY 2011-12. Independent verification by halka Patwari confirmed cultivation of Gwar crop on the disputed land. While Revenue contested full exemption claim since only part of land was used for agriculture, ITAT found the entire parcel constituted an integrated agricultural asset. Taxpayer complied with reinvestment requirements by purchasing new agricultural land and temporarily depositing Rs. 60 lacs in Capital Gains Scheme, which was later properly declared for taxation. The tribunal ruled the section 54B exemption was validly claimed based on documented agricultural use and compliant reinvestment.
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Customs

• Worn Gold Jewelry Not 'Baggage' Under Section 79 - Customs Officers Cannot Detain Personal Ornaments Worn By Travelers

  Case-Laws - HC : HC ruled that gold bangles worn by a passenger returning to India do not constitute "baggage" under the Customs Act 1962 and Baggage Rules 2016. The court determined that the Rule's provision regarding articles "carried on the person" exceeds the scope of the parent Act and is ultra vires. The Parliament consciously excluded worn jewelry from customs provisions, and until legislative amendment, officers cannot detain passengers' worn gold under Baggage Rules. The court ordered release of petitioner's 10 bangles within 7 days, finding no concealment as they were openly worn. The ruling emphasized that delegated legislation cannot exceed parent Act's scope and must respect fundamental rights and customs.
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• Customs Broker Penalized for Misdeclared Clothing Import Without Authorization Under Section 112(a)(i) of Customs Act

  Case-Laws - AT : CESTAT upheld penalties against customs broker for facilitating import of misdeclared worn clothing. Broker failed to exercise due diligence by proceeding without proper importer authorization and verification, relying solely on unauthorized intermediary Nikhil Kumar. Goods were incorrectly classified under CTH 62099090/62044990/62114990 instead of 63090000 and required DGFT authorization as restricted items. Broker submitted false report despite consignment being under alert. Time bar argument rejected as delay occurred due to difficulties in securing importer's presence. Penalty under Section 112(a)(i) of Customs Act maintained as broker's actions rendered goods liable for confiscation. Appeal dismissed.
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DGFT

• DGFT Makes Digital Filing Mandatory for Show Cause Notices, Appeals and Penalties Under Foreign Trade Act 1992

  Circulars : DGFT mandates complete digitization of enforcement and adjudication processes under FTD&R Act 1992. All submissions responding to Show Cause Notices, adjudication proceedings, appeals, and reviews must be filed exclusively through the DGFT portal, eliminating paper-based submissions. Penalty payments must be processed online against specific ECA/Appeal/Review files, discontinuing miscellaneous payment options. This directive aligns with government's paperless trade initiatives and ease of doing business objectives. Non-compliance with digital submission requirements will result in submissions not being entertained. Implementation requires stakeholders to utilize ECA-related help manuals on DGFT website for compliance guidance.
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IBC

• Insolvency Professionals Must Register All Current and New Appointments Through Electronic Portal Within Specified Deadlines

  Circulars : IBBI mandates Insolvency Professionals (IPs) to register all appointments through its electronic portal across multiple insolvency processes including CIRP, liquidation, voluntary liquidation, personal guarantor insolvency, and financial service provider proceedings. New assignments must be registered within 3 days of appointment. For ongoing cases predating this circular, registration deadline is February 28, 2025. Closed cases must be registered by March 31, 2025, with personal guarantor cases extended to April 30, 2025. The directive streamlines compliance monitoring and standardizes assignment tracking through a centralized portal system. IPs must use IBBI-provided credentials to access the portal and complete subsequent regulatory filings including public announcements, EOIs, and auction notices.
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PMLA

• Money Laundering Case: Bail Denied Under PMLA Section 45 as Accused Fails Twin Conditions in Liquor Syndicate Matter

  Case-Laws - HC : HC rejected bail application under Section 483 BNSS read with Section 45 PMLA. Applicant, allegedly part of liquor syndicate involved in money laundering, failed to satisfy twin conditions for bail under PMLA. Court noted prima facie involvement based on investigation findings and charge sheet. Despite defense arguments regarding ED's arrest powers and selective prosecution, HC determined case gravity and material evidence warranted continued detention. Court referenced precedent limiting ED's arrest powers to objective criteria but found sufficient cause existed. Notable inconsistency in prosecution's approach regarding other syndicate members was acknowledged but deemed insufficient to override PMLA requirements for bail grant.
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SEBI

• SEBI Launches MITRA Platform to Help Investors Track Inactive Mutual Fund Folios Over 10 Years Old

  Circulars : SEBI has mandated the implementation of MITRA (Mutual Fund Investment Tracing and Retrieval Assistant), a service platform jointly hosted by QRTAs CAMS and KFIN Technologies to help investors trace inactive and unclaimed mutual fund folios. An inactive folio is defined as one without investor-initiated transactions for 10 years but with existing unit balance. The platform aims to identify overlooked investments, encourage KYC compliance, reduce unclaimed folios, and prevent fraudulent redemptions. QRTAs must operationalize MITRA within 15 working days, with a 2-month beta launch period. The Unit Holder Protection Committee's responsibilities have been expanded to include reviewing inactive folios alongside unclaimed dividends and redemptions. The platform will be accessible through MF Central, AMCs, AMFI, QRTAs, and SEBI websites.
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VAT

• Sales Tax Exemption Under Package Scheme Upheld: Forms 'C' & 'D' Not Required for Pre-2002 Interstate Sales Under Section 8(5)

  Case-Laws - SC : SC upheld tax exemption benefits granted to respondent under Package Scheme of Incentives 1993, ruling that amended Section 8(5) of CST Act requiring Form 'C' and 'D' for interstate sales applies prospectively from 11.05.2002. Respondent's eligibility certificate dated 20.02.1998 and entitlement certificate dated 24.03.1998 granted absolute exemption up to 2012 or Rs.273.54 crore without Form 'C'/'D' requirements. State's revision notices demanding exempted tax for non-submission of forms were invalidated as substantive rights had accrued prior to amendment. Court emphasized retrospective application would impair vested rights, dismissing appeal and confirming exemptions without form submission requirements for pre-amendment period.
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• Input Tax Credit Denied After Dealer Failed to Prove Genuine Purchases and Transport of Copper Materials Under KVAT Act

  Case-Laws - HC : HC upheld revenue's appeal regarding disallowance of input tax credit and penalty imposition under KVAT Act. The respondent failed to substantiate genuine purchases and movement of goods (copper/GI materials) with credible transportation evidence. Court found suspicious use of two-wheelers for heavy goods transport and non-deposit of tax by selling dealers. HC emphasized that burden of proof lies with dealer claiming input tax credit, and mere production of invoices or cheque payments insufficient. The Tribunal erred in overturning Assessing Authority's findings based solely on documentary evidence without considering goods movement proof and non-payment of tax to exchequer. Penalty under Section 70(2)(a) reinstated as First Appellate Authority lacked grounds for quashing it.
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Service Tax

• Reimbursable Expenses and Logistics Income Not Subject to Service Tax Under Sections 66 and 67

  Case-Laws - AT : CESTAT ruled that reimbursable expenses received by service providers alongside service fees are not subject to service tax, following SC's precedent in Intercontinental Consultants case. The tribunal invalidated service tax demands on port congestion, storage, seal amendment, and detention charges, deeming Rule 5(1) of Service Tax Valuation Rules 2006 ultra vires to Sections 66 and 67. Additionally, citing Tiger Logistics precedent, CESTAT held that logistics income and markup on ocean freight are not taxable services. The appellate authority's findings imposing service tax on these components were set aside as legally unsustainable. The appeal succeeded with both demands being overturned as they exceeded statutory scope.
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• Service Tax Not Applicable on Lottery Sales Between States and Distributors Under Entry 62-List II Seventh Schedule

  Case-Laws - SC : SC determined service tax cannot be levied on lottery ticket sales between state governments and distributors. The relationship between Government of Sikkim and distributors was established as principal-to-principal, not principal-agent. The Court held that conducting lotteries falls within "betting and gambling" under Entry 62-List II of Seventh Schedule, placing it under state jurisdiction. Parliamentary amendments to Finance Act, 1994 attempting to impose service tax on lottery distributors were deemed ineffective since no service was rendered in an agency capacity. The Court emphasized that while lottery tickets constitute actionable claims, conducting lotteries is fundamentally a betting and gambling activity regulated under state authority. Appeals by Union of India were dismissed, affirming states' exclusive right to tax such transactions.
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Central Excise

• Manufacturer Wins Appeal: Technical Specifications Provided Pre-Contract Not Includable in Excise Duty Assessable Value Under Section 4(1)(b)

  Case-Laws - AT : CESTAT ruled that specifications, drawings, and designs provided by Company M to appellant manufacturer should not be included in assessable value for excise duty calculations. The Tribunal determined these items did not constitute 'additional consideration for sale' under Section 4(1)(b) of Central Excise Act and Rule 6 of Valuation Rules. Key reasoning centered on consideration principles - for inclusion, items must be provided at promisor's desire after formation of seller-buyer relationship. Here, specifications were provided before contractual relationship establishment, when parties were merely prospective seller-buyer. Following precedent from similar vendor cases, CESTAT allowed appeal, concluding specifications and designs fell outside assessable value scope for excise duty purposes.
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• Sponge Iron Production Case: Revenue's Theoretical Input-Output Ratio Claims Rejected Due to Lack of Evidence

  Case-Laws - AT : CESTAT allowed the appeal against allegations of clandestine production and removal of sponge iron. Revenue's case relied solely on theoretical input-output ratios without corroborative evidence or independent plant study. Appellant's declared ratio (1:1.92 in 2008-09 to 1:1.87 in 2009-10) was not effectively rebutted. Revenue failed to establish clandestine removal of 11,542 MT through vehicle movements, buyer statements, or cash transaction records. The demand of Rs.1,42,845 was set aside as revenue-neutral since both units shared common balance sheet with eligible CENVAT credit. Extended period demand was time-barred absent evidence of suppression. Consequently, penalties on Managing Director were vacated.
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Case Laws:

• GST

• 2025 (2) TMI 510
  Validity of invocation of jurisdiction under Section 73 of the RGST/CGST Act, 2017 when proceedings under Section 61 had already been initiated and an explanation had been provided by the petitioner - it was held by High Court that The invocation of Section 73 was invalid due to the failure to consider the explanation under Section 61. The show cause notice and related actions were set aside. HELD THAT:- It is not required to interfere in the matter. The Special Leave Petition is hence dismissed.

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• 2025 (2) TMI 509
  Cancellation of GST registration - no reasons given in the SCN from which it can be deciphered as to what is the reason why the registration is sought to be cancelled - Violation of principles of natural justice - HELD THAT:- The impugned SCN itself is completely cryptic and raises two grounds for cancellation. Firstly, that the firm is not conducting any business from the declared place of business. This is contrary to the physical verification report dated 22nd August, 2023 (Annexure A.6), provided by the GST inspector in terms of the Rule 25 of the CGST Rules, 2017. The said report clearly records that at the time of the physical verification, the Petitioner himself was present and he was dealing in scrap material and the firm was also found functioning. The Petitioner has neither been given the proper material nor has a hearing been given. The cancellation of GST registration can have adverse consequences on the Petitioner who would find it challenging to conduct his business. The show cause notice is completely cryptic. The cancellation order dated 7th December, 2023 is accordingly quashed and set aside - Petition disposed off.

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• 2025 (2) TMI 508
  Violation of principles of natural justice - adjudication order was passed without giving an opportunity of hearing - denial of petitioner s request for cross-examination of witnesses - HELD THAT:- An order passed under Section 74 of the GST Act is appealable under Section 107A of the said Act. The above Section categorically states that there is a statutory mechanism for redressal enabling the aggrieved party to challenge the reassessment order before an appropriate appellate authority. This Court underlines that this statutory provision ensures that the petitioner has a clear and adequate remedy available for his grievance. This Court further holds that when a specific remedy is available, it is a well settled principle of law that the High Court s writ jurisdiction cannot be ordinarily invoked unless under exceptional circumstances. In the present case, as the petitioner could not demonstrate any exceptional circumstances and has adequate relief by way of preferring an appeal under Section 107 of the GST Act and there arises no need for judicial intervention through a writ petition at this stage - As the writ petition was filed by the petitioner on 29.01.2025 the appellate authority should allow the writ petitioner to file his appeal within 30 days from date and in accordance with law. Conclusion - As the petitioner failed to demonstrate exceptional circumstances, the Court disposed of the writ petition, clarifying that the dismissal did not prejudice the petitioner s right to avail the appellate remedy within 30 days from the date of the order. Petition disposed off.

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• 2025 (2) TMI 507
  Seeking quashing of the second adjudication order - appeal was preferred by the petitioner and the appellate authority rejected the appeal on the ground of limitation - HELD THAT:- On perusal of the report it is clearly seen that the second adjudication order passed on 30th of March, 2023 has been inadvertently passed by the concerned authorities and this Court quashes the concerned adjudication order dated 30th of March, 2023. The appellate authority is directed to hear and dispose of the appeal, on merit, upon giving an opportunity of hearing to the petitioner, within a period of twelve weeks from the date of communication of this order. Petition disposed off.

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• 2025 (2) TMI 506
  Rejection of application for registration - ground given for such rejection was that the applicant does not belong to Andhra Pradesh and the authorized representative, put forward by the petitioner, does not belong to the State of Andhra Pradesh - HELD THAT:- Though the apprehension of the respondents may not be misplaced, it would not mean that registration can be refused on a ground, which is not available under the Statute or the Rules. There do not appear to be any restriction for persons outside the State to come into the State of Andhra Pradesh and seek registration under the APGST Act. Mere apprehension, however well founded, cannot deprive the petitioner of his right to carry on trade and business in the State of Andhra Pradesh. It is also necessary to notice that Article 19 of the Constitution of India, grants every citizen of this Country, the right to set up and do business anywhere in the country. In such circumstances, the order of rejection is clearly without any basis in law. The order of rejection dated 04.11.2024 is set aside. The respondents are directed to register the petitioner under the APGST Act - Petition allowed.

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• 2025 (2) TMI 505
  Legality and jurisdiction of the provisional attachment orders issued under Section 83 of the Gujarat Goods and Services Tax Act, 2017 - period of one year from attachment was completed, without renewal - HELD THAT:- On perusal of the statement of the petitioner recorded on 21.10.2023 which is recorded pursuant to the summons issued under section 70 of the GST Act and placed on record, it clearly shows the admission on the part of the petitioner that the petitioner has indulged into the fraudulent activity of issuance of the bogus bills as well as availing the input tax credit which shows the prima facie case against the petitioner. Moreover, on perusal of the intimation of the tax ascertained as being payable under section 74 (5) of the GST Act issued by the respondent on 04.12.2024, it clearly shows the modus operandi of the petitioner for financial year 2022-23 for which the estimated total liability of tax, penalty and interest comes to Rs.12,33,58,313/-. Considering the record which is available for perusal before us, it is prima facie apparent that the petitioner has indulged into fraudulent activity which requires the exercise of powers conferred under section 83 of the Act for provisional attachment which was made by the respondent on the date of search on 17.10.2023. Therefore, the question now paused before this Court is whether on completion of one year from the date of the provisional attachment on 17.10.2023 of the bank account of the petitioner, the respondent could have renewed the provisional attachment by the impugned order dated 13.11.2024 so far as the bank account of ICICI Bank is concerned and other three bank accounts on 18.12.2024 or not. In the facts of the case, therefore, reliance placed by the petitioner in the case of RHC Global Exports Private Limited [ 2024 (9) TMI 1544 - SC ORDER ] would be no avail as the respondent has applied its mind for the provisional attachment of the bank accounts after recording the satisfaction and after issuance of the intimation in Form DRC 01A. Therefore, only on that ground that the orders are for renewal of provisional attachment, the same cannot be quashed and set aside by adopting the modus operandi to defraud the revenue along with others is not tenable. This Court in the case of M/s. Dhanlaxmi Metal Industries [ 2024 (7) TMI 371 - GUJARAT HIGH COURT ] in similar facts, has held that Considering the facts of the case, it cannot be said that the respondents have committed breach of provision of Section 83 of the Act which is intended to safeguard the interest of the revenue which cannot be said to any harassment to the petitioner as tried to be demonstrated. In the facts of the case, it cannot be said that the respondents have issued provisional attachment order over the movable properties with a view to harass the petitioner. The same analogy in the facts of the case is applied as the petitioner has prima facie found to be indulged in the modus operandi of the issuance of bogus bills and availing ITC on the basis of such bills, whereas in the facts of the case in M/s. Radha Krishan Industries [ 2021 (4) TMI 837 - SUPREME COURT ], the appellant before the Hon ble Apex Court was the person who has received the bogus invoice along with the goods, whreas it is found in the present case that the petitioner has sold the goods of higher value without invoice and has availed ITC on the goods which were of lower value as stated in the modus operandi. Conclusion - It cannot be said that the respondent has committed breach of provision of section 83 of the GST Act which is intended to safeguard the interest of the revenue which cannot be said to any harassment to the petitioner as tried to be demonstrated. In the facts of the case, therefore, the issuance of the impugned orders for provisional attachment over the bank accounts are not required to be interfered with as the petitioner appears to have indulged in the transaction of the fraudulent invoices resulting into loss of revenue by utilizing the ITC of more than Rs. 18.97 crore. No interference is called for in the impugned orders of provisional attachment of the bank accounts of the petitioner during the pendency of the investigation as respondent is rightly found an information as required under section 83 of the GST Act so as to protect the interest of revenue, and hence the provisional attachment of the bank accounts of the petitioner is required to be continue - Petition dismissed.

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• 2025 (2) TMI 504
  Challenge to Assessment Orders passed on the dates mentioned below pursuant to Remand Orders passed by this Court - petitioners have not been allowed to cross examine Charles and his wife Shanthi, the proprietors of the suppliers involved - violation of principles of natural justice - availment of input tax credit (ITC) based on the transactions with the suppliers - HELD THAT:- Though the definition of supply in Section 7 of the respective GST enactments is wide and includes not only actual supply but also supply agreed to be made in future for consideration yet to validly avail and utilize Input Tax Credit , the mandate of Section 16(2)(b) of the respective GST enactments has to be satisfied by the recipient of goods or service. It has to be proved, in the manner recognized under the respective GST enactments, Input Tax Credit cannot be availed, even if the consideration for the proposed supply of goods or service has not been paid as the case may be - As per 2nd proviso to Section 16(2) of the respective GST enactments, if the recipient fails to pay the supplier the consideration within 180 days of invoice, for the goods and services supplied, other than supplies where tax is payable on reverse charge basis, the recipient will not be entitled to claim Input Tax Credit on the payment made towards the value of Supply. A cumulative reading of Rule 138, 138A and Rule 55A of respective GST Rules of 2017 makes it clear that the goods should accompany e-way Bill for movement of goods where the value of goods exceed Rupees Fifty Thousand. Only where there is exemption from obtaining E-way Bill, it is sufficient that the person in-charge may carry a copy of the tax invoice or bill of supply issued as per the provisions of Rule 46, 46A or 49 of the respective GST Rules of 2017 - Rule 56 in Chapter VII of the respective GST Rules of 2017 contemplates maintenance of accounts by a registered person . As per Rule 56 in Chapter VII of the respective GST Rules of 2017, every registered person has to maintain in addition to the particulars specified in Sub-Section (1) of Section 35, a true and up-to date record of goods and services imported or exported, as well as supplies subject to tax under reverse charge. Although cross-examination of the said Charles and his wife Shanthi has not been allowed, it is to be noted that the credit that is claimed under the provisions of the respective GST enactments can be denied if the recipient does not have requisite document that the goods were not received physically by the recipient from the supplier - It may be useful to refer to Rule 36 in Chapter V of the respective GST Rules, 2017. It is intended to implement the requirements of Section 16(2) of the respective GST enactments of 2017. As per Rule 36 of the respective GST Rules, 2017 a registered person as a recipient of goods or services or as an Input Service Distributor, as the case may be can avail Input Tax Credit on the basis of any of the documents prescribed. Under the provisions of the respective GST enactments and the Rules made thereunder, burden is on the recipient to show that the goods were indeed received. In these cases, admittedly, there are no documents to show that the goods had been received and accompanied e-Way bill. Without discharging the burden, the credit that was granted has to be treated as provisional and has to be paid back. Conclusion - i) The burden of proof for claiming ITC lies with the petitioners, and they failed to demonstrate the receipt of goods and the genuineness of transactions. ii) The absence of cross-examination was not a violation of natural justice, as the statements were recorded in the presence of the petitioners. Petition dismissed.

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• 2025 (2) TMI 503
  Violation of principles of natural justice - non-application of mind - rejection of petitioner s claim of refund on the premise that the petitioner had not filed the details sought for along with supporting documents - the learned counsel for the respondent would submit that they would pass orders afresh - HELD THAT:- The impugned order is set aside. It is open to the respondents to pass orders afresh in accordance with law after affording the petitioner a reasonable opportunity of hearing. Petition disposed off.

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• 2025 (2) TMI 502
  Initaition of proceedings u/s 73 of the CGST Act - wrongful availment of Input tax credit - contravention of Section 16(2)(c) of the GST Act - HELD THAT:- It needs to be mentioned that the electronic credit ledger has to be treated as a pool of funds, designated for different types of taxes such as IGST, CGST and SGST. The credit ledger represents a wallet with different compartments of funds. Since the petitioner had availed credit under the CGST and SGST instead of IGST and utilised the same for payment of GST, the benefit of the decision in Rejimon Padickapparambil s case [ 2024 (12) TMI 399 - KERALA HIGH COURT] is applicable to the petitioner. The impugned orders having not considered the aforesaid legal proposition, are required to be set aside and a reconsideration be directed. Conclusion - There was no wrong availing of input tax credit in this scenario. Ext.P6 and Ext.P10 orders set aside - the first respondent is directed to reconsider Ext.P6, afresh - petition allowed.

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• 2025 (2) TMI 501
  Refund claims for GST paid on notice pay recovery were time-barred under Section 54 of the Central Goods and Services Tax (CGST) Act - HELD THAT:- From Circular No. 178/10/2022-GST dated 03.08.2022, it is clear that the Government of India has clarified that the forfeiture of salary or payment of bond amount in the event of an employee leaving the employment before the minimum agreed period, was not taxable, inasmuch as, there was no supply of service by the employer in this situation and therefore, the recovery of notice pay by the employer was not taxable under the CGST Act. Since the aforesaid Circular came out on 03.08.2022, it has to be said that the petitioners could not have had the opportunity of filing of the refund claims in respect of the GST deposited by the Petitioner-Company, till such date. Therefore, the period of two years, for filing a claim, within the meaning of Section 54 of the CGST Act has to be computed from the date of the Circular i.e. from 03.08.2022. In that view of the matter, the refund claims dated 05.11.2022 and 07.11.2022, for whatever period of tax deposited, cannot be said to be time barred. This Court in the case of M/S Gujarat State Police Housing Corporation Ltd. Versus Union of India Anr [ 2024 (1) TMI 1409 - GUJARAT HIGH COURT] where it was held that Considering the above dictum of law, the amount of GST paid by the petitioner is admittedly paid as a self-assessment, which the petitioner was not required to pay as per the Notification No. 32/2017. Accordingly, in the facts of the case, the amount paid by the petitioner from electronic cash ledger is required to be refunded by the respondent authority and could not have been rejected on the ground of limitation under Section 54 (1) of the CGST Act. Conclusion - The State is not entitled to unjustly enrich itself with amounts collected from citizens which are not sanctioned as Tax within the meaning of Article 265 of the Constitution of India. The taxes collected without legal authority must be refunded. Petition allowed.

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• Income Tax

• 2025 (2) TMI 513
  Reopening of assessment u/s 147 - depreciation on the Written Down value of the goodwill - HELD THAT:- It is clear that AO has failed to take into consideration the order passed by the ITAT which is placed on record by the petitioner at Annexure D which clearly shows that the addition made on account of the recommendation of the Dispute Resolution Panel which was deleted as per the provision of Section 92BA of the Act were not applicable for the year under consideration and only because the Tribunal has not dealt with the merits of the matter, the same cannot be considered as an information, so as to assume the jurisdiction to issue the notice u/s 148 of the Act more particularly when the AO has failed to point out the effect of deletion of the addition made in the year 2014-15 and therefore, there is no question of escapement of income for the AY 2018-19 for claim of the depreciation on the Written Down value of the goodwill for the year under consideration. The impugned order as well as the notice issued u/s 148 of the Act are hereby quashed and set aside. Decided in favour of assessee.

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• 2025 (2) TMI 512
  Nature of land sold - LTCG on the sale of agriculture land not being capital asset within meaning of section 2(14)(iii) - HELD THAT:- As per clause (iii) of sub-section (14) of section 2, capital asset means agricultural land in India, not being land situated more than 8 kilometres from the local limits of any municipality or cantonment board. AR has given a certificate from the Dy. EE (R B), Surat, according to which the distance was 8.5 kilometres. CBDT in its Circular No.17/2015 has made it clear that the shortest road distance has to be measured to decide whether the agricultural land is a capital asset or not. In the present case distance between the municipal limit and the agricultural land is to measured having regard to the shortest road distance and not arial distance. The assessment year involved is AY.2012-13 and as per the certificated issued by the Dy. EE (R B), Surat, the distance was 8.5 kilometres. Thus, agricultural land was situated beyond 8 kilometres of the municipal limit. Hence, it was not a capital asset within the meaning of section 2(14)(iii)(b) of the Act. Thus addition towards LTCG is deleted and the grounds are allowed. Application of the provisions of section 50C - Since, we have held that the subject land was not a capital asset u/s 2(14) of the Act, application of the provisions of section 50C are not applicable. Therefore, the AO is directed to delete the addition. Addition being cash deposited in the bank account during financial year - HELD THAT:- As found by AO that assessee had withdrawn cash from bank account on regular interval. In the return filed u/s 148 of the Act, she has shown income of Rs. 1,62,947/- and agricultural income of Rs. 90,000/-. CIT(A) has repeated the finding of AO and upheld the addition. No supporting evidence was filed by the assessee before us to substantiate availability of cash of Rs. 12,01,000/- as on 01.04.2011. The cash book submitted by the lower authorities was only a feeble attempt to justify deposit of cash by the assessee. Assessee has withdrawn various amounts from her bank account. She has also shown agricultural income of Rs. 90,000/- during the year. Considering the totality of facts, it would be reasonable if cash of Rs. 4,00,000/- is treated as explained and addition of remaining amount Rs. 8,89,500/- is upheld. The AO is, accordingly, directed to restrict the addition. Appeal of the assessee is partly allowed.

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• 2025 (2) TMI 511
  Validity of Assessment u/s 153C - limitation date for passing the assessment order - HELD THAT:- The period of limitation referred to in clause ( a ) or clause ( b ) of section 153(B)(1) of the Act available to the Assessing Officer for making an order of assessment or reassessment, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly. In this regard, the case was put up for clarification on 08.07.2024 directing the DR to furnish a report as to whether any valuation report in pursuance to the impugned reference on 23.12.2016 was received by the AO in this case or not and the date on which it was received so as to compute the period of limitation as per the provisions of clause (iii) of the Explanation below section 153B(3) of the Act and as per proviso to this section of the period available to the AO was less than 60 days. Despite giving opportunities, no such report was furnished by the DR. In absence of the same, it is held that no valuation report was received in this case by the AO in pursuance of the impugned reference u/s 142A of the Act on 23.12.2016. Therefore, in this case as no valuation report was received by the AO, the AO was not entitled for any extension of limitation period as claimed by him. Limitation date for passing the assessment order expired on 31.12.2016 and consequently, the assessment order passed by the AO u/s 153C r.w.s. 143(3) of the Act dated 28.08.2017 is barred by limitation and the same is quashed. Decided in favour of assessee.

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• 2025 (2) TMI 500
  Validity of Reopening of assessment - reasons for reopening were examined at the time of original assessment - notice issued after expiry of more than four years - HC decided that [ 2024 (2) TMI 469 - BOMBAY HIGH COURT] reasons recorded would show that there has been no failure on the part of Petitioner to truly and fully disclose material facts. Though the words failure on the part of assessee to disclose fully and truly all material facts necessary for assessment have been used in the reasons recorded, those have been used only to get over the fetters placed by the proviso to Section 147 of the Act. HELD THAT:- We are not inclined to interfere with the impugned judgment; hence, the present special leave petition is dismissed. Pending application(s), if any, shall stand disposed of.

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• 2025 (2) TMI 499
  Interpretation of Section 144C (13) - period of limitation - whether the time limit provided under this sub-section for completing the assessment as per the directions of the DRP is mandatory or directory and consequences thereto? - HELD THAT:- Section 144C (13) of the Act overrides the time limit provided u/s 153 which means that on receipt of the directions from the DRP and by adding one month from the end of the month in which such directions are received, the AO has to pass an order on or before expiry of end of the month in which directions are received. This is in consonance with the objective for which the dispute resolution mechanism was inserted by virtue of Section 144C of the Act. Section 144C (13) is reincarnation of Section 153 which provides for time limit for completion of the assessments. If the provisions of Section 153 are to be construed mandatorily, then, we fail to understand as to how the provisions of Section 144C (13) cannot be construed mandatorily moreso looking at the object of insertion of Section 144C and the consequences and the effect of completion of the assessment proceedings. The law of limitation is intended to give certainty and finality of tax proceedings and to avoid exposure to risk of litigation for indefinite period on future unforeseen events. Application of Section 144C (13) to Present Case - Provisions of Sections 144C (6) and 144C (7) requires the DRP to carry out enquiry before any directions under Section 144C (5) are issued to the AO. This clearly shows post Section 144C (5) directions, no authority other than AO intervenes. Therefore, looked from any angle, in our view, the final assessment order made on 27 February 2015 is beyond the limitation period provided under Section 144C (13) of the Act. Period of Section 144C (13) cannot be counted from the end of the month in which the transfer pricing officer gives effect of the direction of the DRP under Section 144C (5) of the Act. This is so because Section 153 (5A) provides that the assessment pursuant to the TPO giving effect of the order or direction under Section 263 should be completed within two months from the end of the month in which such an order of the TPO received. If the intention of the legislature was to calculate the time limit provided under Section 144C (13) to start from the TPO s order giving effect to the direction under Section 144C (5) then there would have been a similar provision like Section 153 (5A) of the Act. Therefore, even on this count post direction of the DRP, the AO has to complete the assessment within one month from the end of the month in which the direction of the DRP are received which would include any intervening exercise if at all required to be done. As in the case of Vodafone Idea Limited [ 2023 (11) TMI 449 - BOMBAY HIGH COURT ] held that Section 144C (13) of the Act time limit is mandatory. Court concluded the importance of time and it be strictly adhered/respected. Decided in favour of assessee.

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• 2025 (2) TMI 498
  TP Adjustment - Additions made for purported reimbursement of expatriate salaries and payment for royalty - finding and determination on the double deduction nature of the claim for such purported expenses along with reimbursement of software expenses with near identical details, use, functions and purposes purportedly served - ITAT deleted addition Determination of the ALP of reimbursement of software expenses - HELD THAT:- It is material to note that in the present appeal as well, no specific ground relating to the reimbursement of costs for provision of information technology services, which were erroneously included as a part of the costs relating to expatriates has been raised. Thus, the issue regarding determination of ALP or the payments made for information technology related services, does not sensu stricto arise. Reimbursement of Expatriate Costs - Assessee had disclosed the role of each of the expatriate employees. It had also produced sufficient evidence to show that the employees had served in India. It is further the Assessee s contention that it had only reimbursed the amounts paid by the AEs to the expatriate employees without any mark-up. Since there was no element of any mark-up, the ALP could not be lower than the cost paid. Indisputably, the TPO cannot question the commercial wisdom in hiring expatriate employees for rendering assistance. The said decision falls within the scope of commercial expediency and the TPO cannot supplant its opinion in place of the Assessee in regard to need for such services. Plainly, price of resources employed to carry on business cannot be treated as nil if the assessee makes a loss. Illustratively, an assessee may lease an office for its business purposes but incurs a loss. Clearly the ALP of the lease rentals would not be nil because the assessee does not make a profit in the given year. The price of a resource is not contingent on whether the assessee makes a loss or profit. Assessee is required to maintain proper documentation with regard to any international transaction. Thus, the Assessee was obliged to produce relevant documents to establish the arrangement with the AE for employees seconded to the Assessee in India and the remuneration paid to each of the said expatriate employees. It is apparent from the order passed by the TPO that the Assessee had not produced such documentation. The TPO had also noted that the Assessee had not produced the break-up of the payments made to each of the employees. The international transactions regarding receipt of commission for assistance and sourcing was benchmarked using transactional net margin method (TNMM) as the most appropriate method. The commission earned for sourcing activities was found to be on arm s length basis. Indisputably, the cost of any expatriate employees seconded to the Assessee for assistance in such activities would be subsumed as an element of cost. In the present case, the commission earned by the Assessee had been determined on arm s length basis. This would necessarily take into account all elements of costs including payments made to AEs for reimbursement of salaries to expatriate employees. In the aforesaid view, we find no infirmity with the decision of the learned ITAT in accepting the CIT(A) s decision to delete the addition made by the TPO in respect of reimbursement of costs of expatriate employees. Royalty receipts - ALP in respect of royalty cannot be determined as Nil on the ground that the Assessee had incurred losses. The decision of the Assessee to procure technical know-how for its activities is a commercial decision. The cost paid for technical know-how is one of the elements of costs, which was incurred by the Assessee for carrying on its business. The fact that the business retuned a loss cannot possibly lead to the conclusion that the ALP of the technical know-how is Nil. TPO s reasoning in this regard is clearly flawed. Apart from acquiring technical know-how, there may have several other elements of costs such as cost for utilities, cost of labour etc. The fact that an assessee may incur a loss in its business, does not necessarily mean that the value of the utilities availed by it or the value of the labour employed is Nil. As noted hereinbefore, the arms length analysis is not concerned with the commercial expediency of incurring costs. It is merely confined to determining the ALP of the material or the services used. In the present case, the Assessee had in its commercial wisdom decided to acquire technical know-how for carrying on its business activities. This decision is not subject of a review on merits by the learned TPO. The learned TPO is to merely examine whether the amount paid by the Assessee for acquiring the technical know-how was on arms length basis. In other words, what would be the costs an assessee would require to pay if it had acquired the technical know-how from an entity other than its AE on an arms length basis. No infirmity found in the decision of the learned CIT(A) or the learned ITAT in setting aside the ALP adjustment as made by the AO on the recommendation of the TPO. Double deduction - We had pointedly asked Revenue as to what is the element of double deduction, however, apart from referring to the merits of the deletion of the ALP adjustments recommended by the TPO, the learned counsel did not point out any other aspect, which could possibly lead to the conclusion that the Assessee had availed of any double deduction in respect of any element of international transaction. Decided against revenue.

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• 2025 (2) TMI 497
  Adjustment of a refund against old income tax dues approved in the resolution process - HELD THAT:- Adjustment of the refund pertaining to assessment year 2010-11, an assessment within the period giving rise to old tax dues in balance sheet of the corporate debtor, considered in the resolution process and approved, thus has effect of reducing said dues by the adjustment made. Even otherwise we reject petitioner s claim to have the refund because petitioner can only claim to step into and manage affairs of the corporate debtor from date of approval of the resolution plan. Petitioner cannot claim to have paid tax on assessment made for assessment year 2010-11. Refund in respect of that assessment year cannot be due to petitioners, who stepped into shoes of management of the corporate debtors on and from 7th November, 2017 and proceeded to revive it per the approved resolution plan. Petitioners having assailed the adjustment made by filing the writ petition, cannot still rely on alleged omission to notice them on the adjustment.

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• 2025 (2) TMI 496
  Reopening of the assessment - interest free loans and advances to sister/related concerns and claimed interest on borrowed funds in the profit and loss account - HELD THAT:- This Court is of the view that the exercise in the impugned notice dated 28.03.2021 issued under Section 143 of the Income Tax Act and the consequential speaking order dated 29.07.2021 which is impugned in the present are unsustainable primarily because the petitioner has made adequate declarations not only in the returns filed by the petitioner on 29.09.2013 which accompanied the balance sheet, profit and loss account. Even though the assessment order dated 29.06.2015 has not discussed all the points that were raised before the assessment was completed, the information obtained by the petitioner under RTI which was narrated above and indicates that the assessing officer formed an opinion regarding the interest free loans to group company. Thus, was true and full disclosure of all intimation by the petitioner along with the return filed by the petitioner on 29.07.2021. The information available on file particularly the information secured by the petitioner under RTI clearly indicates that the invocation of Section 148 r/w Section 147 was unwarranted. The officer has also justified the conclusion arrived in the assessment order dated 29.06.2015 in his response to audit objection. Unless there was a failure on the part of the petitioner to fully and truly disclosure all material facts necessary for completing the assessment, the invocation of the machinery u/s 148 r.w.s.147 was not available. Thus, the impugned notice and speaking order are liable to be quashed. Decided in favour of assessee.

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• 2025 (2) TMI 495
  Validity of assessment u/s 147 - valid sanction/approval accorded u/s 151 or not? - Sanctioning Authority u/s 151(ii) when order is passed beyond three years from the end of assessment year. HELD THAT:- As per section 151 of the Act, approval of Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General is required for an order under section 148A(d) of the Act, when the order is passed beyond three years from the end of assessment year. In this case, the order under section 148A(d) of the Act, was passed 06.04.2022 for A.Y.2018-19 which is beyond a period of three years from the end of the Assessment Year, with the approval of Principal Commissioner of Income Tax. As decided in Holiday Developers (P.) Ltd, [ 2024 (8) TMI 286 - BOMBAY HIGH COURT] since more than three years have expired from the end of the assessment year, Sanctioning Authority u/s 151(ii) of the Act should be the Principal Chief Commissioner of Income Tax ( PCCIT ) and not the PCIT. Thus, order under Section 148A(d) of the Act, and notice under section 148 are quashed. Decided in favour of assessee.

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• 2025 (2) TMI 494
  Disallowance of prior period expenditure claim - HELD THAT:-Assessee in fact is a company getting assessed at the maximum marginal rate all along. That being the case and in light of the fact that disallowance herein is that of prior period expenditure wherein the corresponding claim pertaining to the earlier assessment year has been recognized on the basis of its alleged crystalization in the relevant previous year. Case law PCIT v. Adani Enterprises [ 2016 (7) TMI 1250 - GUJARAT HIGH COURT] holds such an issue as an instance of revenue neutral expenditure which could not have been disallowed for it s both the year of accrual as well as on crystallization, as the case may be. The same is directed to be deleted in very terms therefore. Assessee s appeal is allowed.

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• 2025 (2) TMI 493
  Disallowance of deduction u/s. 80JJAA - assessee has claimed deduction in revised return of income filed u/s. 139(5) of the Act filed beyond time - HELD THAT:- The assessee for the first time made claim of deduction u/s. 80JJAA in revised return of income filed u/s. 139(5) of the Act on 18.09.2018. The assessment in the case of assessee was completed based on revised return of income. Thus, at the time of making assessment, the mandatory Form 10DA for claiming deduction u/s. 80JJAA was available with the AO. Assessee s claim was rejected at threshold by the AO as he was of the view that claim of deduction u/s. 80JJAA was not made in the time. AO completed the assessment based on assessee s revised return of income. Once, the AO accepts revised return of income, the AO is bound to consider deductions claimed therein. Assessee s claim of deduction cannot be rejected at threshold on the ground that revised return of income was beyond time. Hon ble Apex Court in the case of CIT vs. G.M Knitting Industries (P.) Ltd. and AKS Alloys (P.) Ltd. [ 2015 (11) TMI 397 - SC ORDER] has held that even if the prescribed form for claiming deduction is filed during assessment proceedings, before passing of assessment order, it would be sufficient compliance of the provisions of the Act. We find merit in the case of assessee. The deduction claimed u/s. 80JJAA of the Act is allowable to the assessee subject to the other conditions being satisfied as prescribed under said section for claiming deduction. Since, claim of the assessee was rejected at the brink, we deem it appropriate to restore the matter back to AO for limited purpose to examine as to whether assessee qualifies the other conditions set out in the section and quantify assessee s claim of deduction u/s. 80JJAA - appeal of the assessee is allowed for statistical purposes.

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• 2025 (2) TMI 492
  Addition u/s 68 - cash deposit made by the assessee during the demonetization period - onus to prove - HELD THAT:- DR failed to draw our attention to any document which is contrary to the case made by the assessee or in support of the revenue to substantiate addition with cogent reason. We further find that the assessee has been able to submit the bank statement the details of purchase and sales made during the assessment year 2017-18 the VAT return filed in each quarter in the year under consideration, the cash book and sale register maintained by the assessee particularly for the period commencing from 01.10.2016 to 31.12.2016 and also the details of closing stock. Thus, the onus upon the assessee has duly been discharged in order to substantiate the sales made by the assessee and furthermore the ld. AO has practically not rejected the books of account prepared by the assessee, the addition is found to be not sustainable neither supported by any cogent reason rather found to have been made only on surmises and conjectures. Evidence and explanation so rendered by the assessee cannot be rejected in the absence of any corroborative material on record in the hands of the revenue as is the settle position of law in view of the order passed in the case of Lal Chand Bhagat Ambica Ram [ 1959 (5) TMI 12 - SUPREME COURT] and CIT Vs. Dinesh Jain HUF[ 2012 (10) TMI 158 - DELHI HIGH COURT] - Decided in favour of assessee.

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• 2025 (2) TMI 491
  Addition on account of unaccounted brokerage income - AO observed that assessee being a broker must have received commission @ 1% - HELD THAT:- Apart from referring the word seized material, no other corroborative evidence or statement has been brought on record either by AO or CIT(A) to rebut the explanation offered by assessee by way of any enquiry. Rejection of the explanation of the assessee by the lower authorities without bringing any material on record to controvert the claim of the appellant is not justified and therefore, the additions made by the AO and confirmed by CIT(A) based on presumption, surmises and conjectures would be liable to be deleted. Decision of the CIT(A) in confirming the addition made by the AO on account of unaccounted brokerage income from E-Homes Infrastructure Private Limited rejecting the detailed submissions and explanations duly supported with the evidences brought on record including the confirmation of the brokerage payments can not be approved - addition confirmed by the Ld. CIT(A) is deleted. Decided in favour of assessee.

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• 2025 (2) TMI 490
  Addition of undisclosed income based on unaccounted cash receipts found in seized documents - addition on account of absence of certificate u/sec.65B(4) of the Indian Evidence Act and the digital evidence - addition was based on the basis of data retrieved from the pen drive in the form of print out of excel sheets and subsequent statement of Shri S S Dalwi - as argued that the contents of the pen drive being electronic evidence have to be certified in terms of section 65B of the Indian Evidence Act but which was not done - HELD THAT:- In the instant case there was a certificate drawn u/sec.65B(4) of the Indian Evidence Act for the pen-drive seized from the cabin of Shri Shrikant S. Dalvi which was relied upon by the Assessing Officer while making the impugned addition and since such a copy of the certificate was provided to the assessee for its comments and the assessee could not make any counter-comments to the certificate so issued by the Assessing Officer u/sec.65B(4) of the Indian Evidence Act, therefore, in absence of any contrary material brought to our notice, in our opinion the Ld. CIT(A) is justified in rejecting the above grounds. Assessing Officer in the instant case has obtained a certificate u/sec.65B(4) of the Indian Evidence Act and copy of which was also forwarded to the assessee and the assessee had no answer to the same - Decided against assessee. Undisclosed cash receipts - CIT(A) in treating 85% of the total cash receipts as income of the assessee - CIT(A) restricted the addition to 85% of unrecorded cash receipts on account of sale of scrap on the ground that the seized documents also contain certain expenditure - HELD THAT:- It is an admitted fact that during the course of search, excel sheets which were retrieved from the pen drive seized from the cabin of head cashier Shri S S Dalvi, contain both unaccounted cash receipts as well as unaccounted cash expenditure. While the AO taxed the entire unaccounted cash receipts as income of the assessee, however, he ignored such unaccounted cash expenditure on the ground that the assessee could not correlate such expenditure as relatable to such unaccounted cash receipts and the said expenditure also contains certain expenditure not allowable as per provisions of Explanation to section 37. It is the settled position of law that the seized documents are to be considered as a whole and the department cannot consider a part of the seized documents which suits it and ignore the other part that does not suit it. So far as the allegation of the Assessing Officer as well as the Ld. CIT(A) that such unaccounted expenditure contains certain illegal payments is concerned, there is no dispute to the fact that it contains certain payments to government officers. However, the same has not been quantified either by the assessee or by the Assessing Officer or by the Ld. CIT(A). We find the Ld. CIT(A) while analyzing the seized documents for assessment year 2018-19 has given the details of several cash expenses on test check basis which according to him are allowable expenses Considering the totality of the facts of the case only the net profit embedded in such receipts should be taxed when both unaccounted receipts and unaccounted expenses are found during the course of search, we are of the considered opinion that the profit on account of such unaccounted cash receipts should be determined at the same rate or nearby rate of net profit that has been declared by the assessee and accepted by the Revenue for the respective assessment years. The order of the Ld. CIT(A) is accordingly modified and the Assessing Officer is directed to re-compute the income from unaccounted cash receipts in the above percentage and make necessary additions. Denial of deduction u/sec.35(2AB) - capital and revenue expenditure incurred for in house R D activities - HELD THAT:- Only the existence of approval and incurring of the expenditure were relevant considerations in the pre-amended period and not the amount quantified by the prescribed authority. The new stipulations came to be introduced w.e.f. 01-07-2016. As the assessment year under consideration is 2018-19, the amended sub-clause (b) of Rule 6 (7A) is applicable. We, therefore, hold that the ld. CIT(A) was justified in restricting the amount of weighted deduction to the quantification done by the prescribed authority. Assessee is not eligible for deduction of the entire revenue expenditure claimed by it u/s 35(2AB) for the assessment years 2017-18, 2018-19 and 2019-20 but only to the extent quantified by the DSIR. However, as held above, since the stipulation came to be introduced w.e.f. 01.07.2016 the section of quantification by the DSIR is not applicable for assessment year 2016-17 and therefore, the Ld. CIT(A) is not justified in restricting the deduction to the extent determined by the DSIR for assessment year 2016-17. We therefore, set aside the order of the Ld. CIT(A) on this issue for assessment year 2016-17 and direct the Assessing Officer to allow the claim of deduction u/s 35(2AB) of the entire revenue expenditure. Cash expenditure during the year exceeds the unaccounted cash receipts - HELD THAT:- After considering the opening cash balances as on 01.04.2012 as per the seized documents, there is no cash deficit for the impugned assessment year. The Revenue is not in appeal for assessment year 2015-16 for the availability of opening cash balance determined by CIT(A) as per the seized document. Therefore, no infirmity in the order of the Ld. CIT(A) deleting the addition made by the Assessing Officer on account of unexplained expenditure u/s 69C.

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• 2025 (2) TMI 489
  Ex-parte order u/s.250 - Unexplained capital gain u/s. 45 - long term capital gain on sale of land by applying sec.50C(1) without referring the matter to DVO for valuation of such land u/s.50C(2) when actual sale consideration is less than the stamp duty value - HELD THAT:-Although we concur with the CIT(Appeals) that the appellate proceedings could not have been jeopardized for want of prosecution but at the same time, are unable to persuade ourselves to subscribe to the manner in which the appeal had been disposed off by him. It transpires, on a perusal of the statement of facts that were filed by the assessee before the CIT(A) that he had assailed the impugned addition of undisclosed capital gain u/s. 45 for the reason that the AO had grossly erred in treating the entire amount of sale consideration as his undisclosed capital gain u/s. 45 of the Act. We are of the view that though the assessee had not participated in the appellate proceedings, but the CIT(Appeals) ought to have adverted to the facts involved in the case before him in the backdrop of the grounds based on which the impugned addition was assailed before him and adjudicated the said respective issues vide a speaking order instead of dismissing the same for want of prosecution. CIT(Appeals) had disposed off the appeal for non-prosecution and had failed to apply his mind to the issues which did arise from the impugned order and was assailed by the assessee before him. We are unable to persuade ourselves to accept the manner in which the appeal of the assessee had been disposed off by the CIT(Appeals). In our considered view, once an appeal is preferred before the CIT(Appeals), it becomes obligatory on his part to dispose off the same on merit and it is not open for him to summarily dismiss the appeal on account of non-prosecution of the same by the assessee. In fact, a perusal of Sec.251(1)(a) and (b), as well as the Explanation to Sec.251(2) of the Act reveals that the CIT(Appeals) remains under a statutory obligation to apply his mind to all the issues which arises from the impugned order before him. As per the mandate of law the CIT(Appeals) is not vested with any power to summarily dismiss the appeal for non-prosecution. We, thus, not being able to persuade ourselves to subscribe to the dismissal of the appeal by the CIT(A) for non-prosecution, therefore, set-aside his order with a direction to dispose off the same on merits. Appeal filed by the assessee is allowed for statistical purposes

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• 2025 (2) TMI 488
  Addition u/s 68 - assessee has given contradictory replies during the course of assessment proceedings - HELD THAT:- It is case where the amount paid by the assessee is an asset in it books of account and not the one where it has received the amount and is a liability. It is claimed that assessee has written off this amount as a bad debt/business loss in the books of accounts for the year ending 31.03.2024 relevant to AY 2024-25. As noted that the amount was advanced by the assessee in its ordinary course of business in AY 2016-17 and that there is no credit transaction pertaining to the sum so advanced to Santosh Trust in the year under consideration. Provisions of Section 68 are attracted only in the case of cash credits in the relevant year of credit. In the present appeal before us, admittedly it is a fact that there is no credit for the amount which has been held to be an unexplained liability. The transaction of advancing the amount to Santosh Trust pertains to Assessment Year 2016-17. We do not find any infirmity in the factual finding arrived at by ld. CIT(A) directed to delete the additions so made. The findings so arrived at is fortified by the decision of Ivan Singh [ 2020 (2) TMI 850 - BOMBAY HIGH COURT] which observed that from the plain reading of the provisions of section 68 it does not appear that where any sum is found to be credited in the books of account maintained for any previous year and there is no proper explanation for such credit, the sum so credited can be charged to the income tax as the income of the assessee of that previous year . Thus, the grounds raised by the Revenue are dismissed.

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• 2025 (2) TMI 487
  Disallowance of claim of exemption u/s 54B - investment in new agriculture land - HELD THAT:- Undisputedly the assessee has shown agricultural income for earlier years which is demonstrated that for A.Y. 2011-12 the agricultural income of Rs. 14,000/- is shown. It is not the case of the Revenue that the land being sold by the assessee was not agricultural land or was being used for any other purposes but assessee claims it to be agricultural land. The grievance of the revenue is that part of the land is used for agricultural purposes but assessee claims deduction u/s 54B of the Act on whole of the land. It is fact that whole parcel of the land was an integrated asset. Even the independent report called for by the AO from halka Patwari also supports that assessee carried on the activities of agricultural land by growing Gwar crop. This independent enquiry made by the AO clinches the issue in favour of the assessee. Capital gain earned by the assessee is chargeable to tax on sale of agricultural land and consequent exemption u/s. 54B cannot be denied. Assessee purchased agricultural land out of the Capital Gain and further deposited a sum of Rs. 60.00 lacs in Capital Gain Scheme, which was on withdrawal offered for taxation. Assessee has produced the copies of the return which is not disputed .

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• Customs

• 2025 (2) TMI 486
  Doctrine of ultra vires - gold bangles worn by the petitioner upon returning to India fall under the definition of baggage as per the Customs Act, 1962, and the Baggage Rules, 2016 or not - interpretation of the provision as carried on the person of the Baggage Rules, 2016 - HELD THAT:- While enacting the provisions of the Customs Act, the Parliament has consciously excluded the jewels worn by the passengers. If there is any intention to put all the passengers into hassle, disrespecting their proprietorial rights, dignity, forgoing the customs, against the fundamental rights, let the Parliament take a decision and amend the provisions of the Act. Till then, the Officers have to apply their minds with regard to detaining the passenger and the gold worn by them as the same would not fall within the purview of the Baggage Rules, 2016. The Doctrine of ultra vires states that the Rule making body must function within the purview of the Rule making authority conferred on it by the parent Act. As the body of making rules or regulations, there is no inherent power of its own to make rules, but such power arise only from the Statute and hence, it must necessarily function within the purview of the Statute - In the present case, the Rule making body had made the Baggage Rules as if they are having inherent power of its own to make rules beyond the scope of the Statutes, and they have incorporated the word carried on the person . In the present case, admittedly, the Rule making Authorities made the Rules by traveling beyond the scope of the Act, which would amount to ultra vires. In such case, the Statute would prevails over the Rules. When such being the case, the Statute referred only with regard to the baggage and therefore, the Rule has to be confined and read only with regard to the baggage and not with regard to the articles carried on the person . In the judgment of the Hon ble Apex Court rendered in Naresh Chandra Agarwal vs. Institute of Chartered Accountants of India and others [ 2024 (2) TMI 493 - SUPREME COURT ], it has been held that (a) The doctrine of ultra vires envisages that a Rule making body must function within the purview of the Rule making authority, conferred on it by the parent Act. As the body making Rules or Regulations has no inherent power of its own to make rules, but derives such power only from the statute, it must necessarily function within the purview of the statute. Delegated legislation should not travel beyond the purview of the parent Act. (b) Ultra vires may arise in several ways; there may be simple excess of power over what is conferred by the parent Act; delegated legislation may be inconsistent with the provisions of the parent Act; there may be noncompliance with the procedural requirement as laid down in the parent Act. It is the function of the courts to keep all authorities within the confines of the law by supplying the doctrine of ultra vires. In the above cases, the Court had held that a Rule Making Authority has to make the Rules within the scope of the parent Act and no Rules shall exceed beyond the scope of the parent Act since it would amount to ultra vires. Thus, in the present case, the Baggage Rule, 2016 will apply only to the baggage and the Rule made to the extent that the article carried on the person will not include baggage, which was in excess of powers conferred by the Rule making Authority and would amount to ultra vires. Therefore, the jewellery worn in person will not come under the purview of baggage - In the case on hand, the 10 nos. of bangles were admittedly worn by the petitioner and on the request of respondents it was handed over to them. Normally, in our country any person will worn this quantity of gold for a marriage and hence, in such case, it appears to be just and reasonable. All these aspects have to be taken into consideration by the respondents. However, since the Baggage Rule, 2016, includes the articles carried on the person, the Officials had treated the same as baggage and hence, this Court does find any fault on the Officials also. Conclusion - Since this Court has held that the provision as carried on the person of the Baggage Rules, 2016 is ultra vires, the detention of gold under the Baggage Rules, 2016, in the present case would not apply, unless and otherwise if it is secreted in person, for which, the proceedings shall be initiated under Section 101 of the Customs Act, 1962, however, that is not the case of the respondent. The petitioner worn the 10 nos. of bangles in her hands and thus, there is no secrecy or concealment. Thus, the detention of petitioner s 10 nos. of bangles is neither proper nor in accordance with law. The respondents are directed to dispose of the petitioner s representation dated 08.02.2024 and release the goods within a period of 7 days from the date of receipt of copy of this order - petition allowed.

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• 2025 (2) TMI 485
  Classification of imported goods - Worn clothing and other worn articles - Rejection of classification of goods declared as CTH 62099090/62044990/62114990 and re-classification under 63090000 - restricted goods or not - Rejection of the declared assessable value of the goods - redetermination of value under Rule 5 of the Customs Valuation (Determination of value of imported goods) Rules, 2007 - Absolute confiscation - penalty u/s 112(a)(i) and/ or 114(A) and 114AA of the Customs Act, 1962. HELD THAT:- The appellant was never in direct contact with the importer. The G-card holder of the appellant was contacted by one Shri Nikhil Kumar. Admittedly no authorization of importer in favour of Shri Nikhil Kumar nor in favour of the present appellant is on record. The impugned consignment is a high value consignment. Much more due diligence was required on part of the Custom Broker in which the appellant has miserably failed. His statement rather reveals that the appellant per se was unaware about the true nature of the import. Since the importer was not found at the given address and the appellant was acting without any proper consultation and authorization, it can readily be held that the appellant was intentionally shirking his liability. The goods in question were restricted under Indian law requiring authorization from DGFT. Admittedly, the said authorization was not obtained and the appellant did not bother to check for that authorization. Time limitation - HELD THAT:- Though appellant has taken the plea that the show cause notice vide Corrigendum dated 16.11.2023 was much beyond the show cause notice dated 28.11.2022 as was served upon the importer, the show cause notice is alleged to be barred by time. However, it is apparent on record that the delay had occurred due to the time taken for securing the presence of the importer and their representative/key person by the appellant himself. One of them had never joined the investigation. The appellant himself was maid to serve the summons to the importers. Penalty under Section 112(a)(i) of Customs Act, 1962 - HELD THAT:- The appellant had admitted the goods to be torn old clothes as against the declaration about new women garments. The appellant did not exercise any diligence despite the consignment under suspension was diverted to warehousing and was put on alert. The appellant rather submitted a false report. All such acts and that the goods became liable for confiscation. Resultantly, appellant has committed such acts which have rendered the impugned goods liable for confiscation. Resultantly, the penalty under Section 112(a)(i) of the Customs Act, 1962 has rightly been imposed upon the appellant. There are no infirmity in the order under challenge. Conclusion - The appellant s lack of due diligence and reliance on unauthorized representatives contributed to the import of misdeclared and overvalued goods, justifying the penalties imposed. Appeal dismissed.

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• PMLA

• 2025 (2) TMI 484
  Seeking grant of regular bail under section 483 of the Bhartiya Nagrik Surksha Sanhita, 2023 read with Section 45 of the PMLA 2002 - Money Laundering - proceeds of crime - scheduled offence/predicate offence - no material to corroborate the false statements of the individuals who have been arraigned as co-accused persons in the instant case - HELD THAT:- There is prima facie involvement of the applicant in the crime in question and the charge sheet has been filed. Since, the allegations against the applicant are serious in nature and there was material to infer his involvement in serious crimes. However, the Apex Court has held that the power of ED to arrest must be based on objective and fair consideration of material against a person. Under the PMLA, ED officers can arrest a person if they have reasons to believe based on the material in their possession that the individual is guilty. It has been held by the Apex Court that PMLA allowed arrests on the subjective opinion of ED officer, the court said an officer s reasons to believe that a person was guilty an deserved arrest should not be based on mere suspicion. The Apex Court in the matter of Directorate of Enforcement Vs. Aditya Tripathi [ 2023 (5) TMI 527 - SUPREME COURT ] has held that the power to arrest under the Prevention of Money-laundering Act (PMLA) cannot be exercised on the whims and fancies of Directorate of Enforcement (ED) officers. The court wondered if the ED even had a consistent, uniform and one-rule-for-all policy on when they should arrest people. It said the ED s power to arrest must be based on objective and fair consideration of material against the accused. It is prima facie clear that on the one hand, it is claimed that the matter is of a huge economic loss to the State Exchequer and the offence is of highly serious nature and on the other hand, the distillers who are allegedly supplying illegal liquor causing huge financial loss to the State exchequer, have not been made accused despite the fact that their names have been mentioned in the complaint made by the ED as member of the syndicate. Prima facie it appears that the prosecution has adopted an inconsistent stance being both hot and cold in its approach and has acted in a pick and choose manner in investigation. Conclusion - It has been revealed that in the investigation conducted by the police during the predicate office, the applicant was part of the liquor syndicate and was involved in money-laundering and proceeds of crime along with other co-accused therefore, even if it is presumed that no predicate offence has been levelled against him, therefore, the applicant is entitled to get bail under PMLA, 2002, is not acceptable and deserves to be rejected and also considering the material placed on record, which prima facie shows involvement of the applicant in the crime in question, therefore, considering entirety of the matter, this Court is of the opinion that the applicant is unable to satisfy twin conditions for grant of bail under Section 45 of the PMLA, 2002, as such, it is not a fit case for grant of bail to the applicant for the reasons. The prayer for bail made by the applicant under Section 483 of the Bhartiya Nagrik Suraksha Sanhita, 2023 ( BNSS ) read with Section 45 of the PMLA, for the alleged offence punishable under Sections 3 4 of the PMLA, 2002 is hereby rejected.

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• Service Tax

• 2025 (2) TMI 483
  Levy of service tax upon the sale of lottery tickets - Constitutional validity of clause (zzzzn) to sub-section (105) of Section 65 of Finance Act, 1994 as introduced vide Finance Act, 2010 - contravention of Article 248 of the Constitution of India read with Entry 97-List I to the Seventh Schedule thereto - principal-to-principal transaction - scope of betting and gambling - HELD THAT:- The parliamentary amendments made to the Finance Act, 1994, for the purpose of imposing service tax on the respondents assessees herein as business auxiliary service under sub-section 19 of Section 65 of the said Act effective from 01.07.2003 and by way of the insertion of the Explanation to Section 65(19)(ii) of the Finance Act, 1994 culminated in the judgment of this Court in K. Arumugam [ 2024 (9) TMI 182 - SUPREME COURT] . In the said case, this Court held that the relationship between the Government of Sikkim and the assessees therein was not that of principal and agent but one of principal and principal. Therefore, up to the year 2010, the lis between the parties ended with the judgment in K. Arumugam. For the period from 01.07.2010 till 30.06.2012, amendment was made to Section 65(105) by insertion of clause (zzzzn) which defined promotion, marketing, organizing or in any other manner assisting in organizing games of chance, including lottery, bingo or lotto in whatever form or by whatever name called, whether or not conducted through internet or other electronic networks as a taxable service . The Sikkim High Court observed that the said clause essentially means the conducting of lotteries within the scope and ambit of betting and gambling as per Entry 62 - List II of the Seventh Schedule of the Constitution and therefore, on the very same activity of betting and gambling, service tax cannot be levied. The expression lottery distributor or selling agent was defined by inserting clause (31A) to Section 65B to mean a person appointed or authorized by a State for the purposes of promoting, marketing, selling or facilitating in organizing lottery of any kind, in any manner, organized by such State in accordance with the provisions of the Lotteries (Regulation) Act, 1998. Since betting, gambling or lottery was included in the Negative List, an Explanation was inserted to Section 66D(i) to say that the said expression betting, gambling or lottery shall not include the activity specified in Explanation 2 to clause (44) of Section 65B. Thus, the intent of the Parliament was that any transaction in an actionable claim (lottery being an actionable claim) would not include an activity carried out for the distribution of lottery by the distributor. In other words, such activity of the distributor would not amount to the activity of betting, gambling or lottery. The expression betting, gambling or lottery in the Explanation to Section 66D(i) has to be given its true intent and meaning as conducting a lottery is nothing but an activity coming within the scope of betting and gambling. This is by the application of the principle of noscitur a sociis where the expression lottery takes its meaning from betting and gambling . Although a lottery ticket is nothing but an actionable claim, the conduct of a lottery scheme is nothing but a betting and gambling activity. Therefore, it is only Entry 62 List II which enables the imposition of tax by the State Government. The activity of betting and gambling which includes conducting of a lottery is regulated under Entry 34 List II, with Entry 62 List II being the taxation entry. By way of Finance Act, 2015, clause (a) of the Explanation to Section 67 containing the definition consideration was amended to include, inter alia, any amount retained by the lottery distributor or selling agent from gross sale of lottery tickets in addition to the fee or commission, if any, or, as the case may be, the discount received, i.e., the difference in the face value of the lottery ticket and the price at which the distributor or selling agent gets that ticket. The said amendment would have no consequence and bearing on the substantive provisions for the reasons that we have stated above. This is because the distributor buys at wholesale price from the State Government and sells it at a higher price to the retailer - the amendment made to clause [ii(a)] of the Explanation 2 to Section 65B(44) in the year 2016 that the expression transaction in money or actionable claim would not include any activity carried out, for a consideration, in relation to, or for facilitation of, a transaction in money or actionable claim, including the activity carried out, inter alia, by a lottery distributor or selling agent on behalf of the State Government, in relation to promotion, marketing, etc. in accordance with the provisions of the Lotteries (Regulation) Act, 1998 is only an innocuous amendment which is only cosmetic in nature. It is found that at each stage, the amendments made to the Finance Act, 1994, in order to impose service tax on the sole distributor/purchaser of the lottery tickets (respondents-assessees herein) have been unsuccessful. The amendment to the said definition would in no way detract from the substance of the relationship between the State Government and the sole distributor or purchaser of the lottery tickets which is one of principal to principal and not of principal-agent. There being no agency and no service rendered by the respondents-assessees herein as an agent to the Government of Sikkim, service tax is not leviable on the transactions between the purchaser of the lottery tickets (respondents-assessees herein) and the Government of Sikkim. Conclusion - The sale of lottery tickets by the Government of Sikkim to the respondents-assessees is a principal-to-principal transaction, and the activity of conducting lotteries falls within the scope of betting and gambling, which is under the State s jurisdiction. There are no merit in the appeals filed by the Union of India and others. Hence these appeals are dismissed.

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• 2025 (2) TMI 482
  Valuation of service tax - inclusion of certain charges collected by the appellants - logistics income constituted taxable service or not. Inclusion of certain charges collected by the appellants - HELD THAT:- The issue is no more res-integra in view of the decision of the Honourable Supreme Court in the case of UOI v Intercontinental Consultants and Technocrats Pvt Ltd, [ 2018 (3) TMI 357 - SUPREME COURT] which has considered the issue of liability to pay service tax on reimbursable expenses received by the service provider in the course of rendering services for the client, apart from the consideration received for rendering the services on which the client has discharged the liability to pay service tax. The Honourable Supreme Court affirmed the decision of the Delhi High Court in Intercontinental Consultants Technocrats Pvt Ltd v UOI, [ 2012 (12) TMI 150 - DELHI HIGH COURT] , wherein Rule 5(1) of the Service Tax Valuation Rules, 2006 which provided for inclusion of expenditures or costs incurred by the service provider in the course of providing taxable services, in the value of such taxable services, was stuck down as ultra vires Section 66 and Section 67 of the Act and as travelling beyond the scope of the said sections. The findings in the impugned order in appeal confirming the demand on port congestion charges, port storage charges, seal amendment charges and detention charges cannot sustain and are liable to be set aside. Levy of service tax on differential income representing logistics income - HELD THAT:- This Tribunal in its decision in Tiger Logistics India Ltd v. Commissioner of Central Tax GST, New Delhi, [ 2023 (7) TMI 546 - CESTAT NEW DELHI] has also, after noticing a number of earlier decisions, held that the demand of service tax on mark up on ocean freight is not tenable in law. In the light of the aforesaid Tribunal decisions, the finding of the appellate authority holding the logistics income of the appellants as exigible to service tax, and demand upheld thereon, is unsustainable and liable to be set aside. Conclusion - i) The findings in the impugned order in appeal confirming the demand on port congestion charges, port storage charges, seal amendment charges and detention charges cannot sustain and are liable to be set aside. ii) The finding of the appellate authority holding the logistics income of the appellants as exigible to service tax, and demand upheld thereon is unsustainable. Appeal allowed.

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• 2025 (2) TMI 481
  Valuation of service tax - inclusion of expenses incurred by the appellants, which were reimbursed by their clients in the assessable value - Pure Agent under Rule 5(2) of the Valuation Rules - invocation of the extended period of limitation - Penalties - HELD THAT:- The issue is no more res-integra in view of the decision of the Honourable Supreme Court in the case of UOI v Intercontinental Consultants and Technocrats Pvt Ltd, [ 2018 (3) TMI 357 - SUPREME COURT] which has considered the issue of liability to pay service tax on reimbursable expenses received by the service provider in the course of rendering services for the client, apart from the consideration received for rendering the services on which the client has discharged the liability to pay service tax. The Honourable Supreme Court affirmed the decision of the Delhi High Court in Intercontinental Consultants Technocrats Pvt Ltd v UOI, [ 2012 (12) TMI 150 - DELHI HIGH COURT] , wherein Rule 5(1) of the Service Tax Valuation Rules, 2006 which provided for inclusion of expenditures or costs incurred by the service provider in the course of providing taxable services, in the value of such taxable services, was stuck down as ultra vires Section 66 and Section 67 of the Act and as travelling beyond the scope of the said sections. Extended period of limitation - Penalties - HELD THAT:- There are force in the contentions of the learned counsel for the appellants that the issue involved was of interpretational nature and no evidence of malafides has been adduced that would attract the extended period of limitation or warrant imposition of penalties. Conclusion - i) The reimbursable expenses, not forming part of the consideration for services rendered, should not be included in the taxable value. ii) The invocation of the extended period of limitation was unjustified. iii) Penalties set aside. The impugned order in appeal is set aside and the appeals are allowed.

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• 2025 (2) TMI 480
  Levy of service tax - whether the activities of the appellant developer is exigible to service tax under construction of complex service for the period from January 2009 to March 2010? - HELD THAT:- The issue stands decided in the appellant s favour by the decision of this Tribunal in the appellant s own case in M/S. SMS GARDENS PVT. LTD. AND M/S. V.R. NACHIMUTHU (CBE) VERSUS COMMISSIONER OF GST CENTRAL EXCISE, SALEM [ 2021 (1) TMI 1213 - CESTAT CHENNAI] . In the said decision in para 4.1, the activities of the appellant have been discussed and it was held that The show cause notices in all these cases prior to 1.6.2007 and subsequent to that date for the periods in dispute, proposing service tax liability on the impugned services involving composite works contract, under Commercial or Industrial Construction Service or Construction of Complex Service, cannot therefore sustain. Conclusion - For composite contracts involving transfer of property in goods, service tax liability would fall under Works Contract Service. The impugned order in appeal upholding the impugned order in original of the adjudicating authority confirming the demand under construction of complex service together with demand of appropriate interest and penalties imposed, is unsustainable and is liable to be set aside - Appeal allowed.

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• 2025 (2) TMI 479
  Levy of service tax - whether the activities of the appellant while engaged for transportation of petroleum products by road by the consignor HPCL can be subjected to levy of service tax as supply of tangible goods service? - HELD THAT:- The issue stands decided in the appellants favour by the decision of this Tribunal by the Final Order No.40368/2019 dated 21.02.2019 in M/s. Erode Lorry Owners Association Vs. The Commissioner of GST Central Excise, Salem Commissionerate [ 2019 (3) TMI 43 - CESTAT CHENNAI] where it was held that Coming to the tax liability on Supply of Tangible Goods, from the agreement and other facts on record it is evident that the contract was for transportation of petroleum products on which service tax under GTA has been discharged by M/s. HPCL themselves. The nature and type of agreement between the two parties also service to indicate that there is no Supply of Tangible Goods involved in this matter. This being so, the demand made under this category also cannot be sustained and requires to be set aside. It is found from the annexure to the statement of demand No.34/2014 dated 16-10-2014 that for the year 2013-14, the amount received by the appellants on lorry stand parking rent and the amount received on building rent put together and sought to be taxed under renting of immovable property services is very much under the threshold limit for the said year as specified under the Notification 33/2012-ST dated 20-06-2012. Conclusion - The transportation services provided did not fall under the category of supply of tangible goods service and that the amounts received under renting of immovable property service were within the exemption limit. The impugned Order in Appeal is set aside. The appeal is allowed in toto.

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• Central Excise

• 2025 (2) TMI 478
  Valuation of Excise duty - inclusion of notional cost of the drawings and designs provided by Maruti to the appellant in the assessable value - additional consideration for sale or not - HELD THAT:- It is undisputed that if they form additional consideration for sale , then their value must be included in the assessable value as per section 4(1) (b) of the Central Excise Act,1944 [Excise Act] and Rule 6 of the Central Excise Valuation (Determinationof Price of Excisable Goods) Rules, 2000 [Valuation Rules] and if they do not form additional consideration for sale , then they cannot be included and the assessable value will be the transaction value itself as per section 4(1) (a) of the Excise Act. For something to be consideration , it must be something done or something abstained from doing at the desire of the promisor. This something could be done or abstained from doing either by the promisee himself or by someone else but it must be at the desire of the promisor - the consideration could be in cash or some other valuable or simply something done or abstained from doing under the Contract Act but under Sale of Goods Act, only price can be the consideration. Under the Central Excise Act,consideration has to be for cash, deferred payment or some other valuable consideration . Thus, the scope of the consideration under the three Acts varies somewhat, but what does not vary is that it has to be at the desire of the promisor done either by the promisee or by someone else. The question, however, is whether these specifications, drawings and designs of value are consideration in the transactions between Maruti and the appellant. As discussed, for something to be a consideration, it must be at provided at the desire of the promisor by either the promisee or someone else - For a promise to come into existence, there must be a proposal (or offer) from the seller and its acceptance by the buyer. Until the proposal is made and accepted, there is no promise. Once the offer is made and accepted, the promise makes the seller the promisor and the buyer the promisee. Before the offer and its acceptance, there is neither any promise nor any promisor-promisee relationship between them as they were only prospective seller and prospective buyer. When the appellant submitted its quotations and Maruti accepted them, Maruti became the promisee and the appellant the promisor. In a batch of appeals decided by this Tribunal in Denso India Private Limited vs. Additional Director General (Adjudication) [ 2024 (3) TMI 686 - CESTAT NEW DELHI ], appeals in respect of other vendors of Maruti were decided in favour of the appellants on an identical issue. Conclusion - The specifications and designs provided by Maruti were not to be included in the assessable value for excise duty purposes. The impugned order cannot be sustained - Appeal allowed.

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• 2025 (2) TMI 477
  Clandestine production and removal of sponge iron - shortage of stock - undervaluation - input / output ratio - it is alleged that by consuming 160198 MT of Iron Ore Fe of 63% the Appellant should have manufactured estimated production of 95927 MT of Sponge Iron whereas the Appellant has produced 84385 MT of Sponge Iron which is short by 11542 MT - Penalty on Managing Director. HELD THAT:- There is nothing to indicate that the Revenue has made independent study of the working of the appellant s plant to take some sample outputs to study the pattern of input / output ratio. As per the data of Purchase of Iron Ore Fe Content, Grade-wise Coal purchased, Input / output ratio declared by the appellant in their Annual Returns, reproduced in the previous paragraphs by way Table, the year-wise details show that the input / output ratio ranges between 1 : 1.92 in 2008-09 to 1 : 1.87 during the period April 2009 to February 2010. The contents of the Table are all declared figures and are verifiable. There is nothing to indicate that due consideration was given for these submissions by the Adjudicating authority before coming to his conclusions. His conclusions seem to be flowing directly from the input/output ratio adopted by the Dept at the time of issuing the Show Cause Notice. The appellant has filed the Annual Returns showing their input / output ratio for the years 2008-09 and 2009-10, which has not been rebutted by the Revenue by taking up sample production lots. The Revenue has relied solely on the so called expert opinion alone. It is observed from the above decisions as well as the decisions relied within these cases, mere expert opinion on its own, without any cogent, corroborative evidence has no value and does not carry the Revenue further. Whether the clandestine clearance stands proved by the Revenue? - HELD THAT:- The entire focus of the Revenue in this case has been on proving the clandestine manufacture based on the input/output ratio as given by expert third party. There are no effort has been made by the Revenue on this front - Removal of 11542 MT of sponge iron would require movement hundreds of vehicles. No private records have been seized showing any cash transactions. No statements have been recorded from the purported buyers of the sponge iron. Thus, there are no iota of evidence being gathered by the Revenue to fortify their allegation towards clandestine removal. The Revenue has not brought in any evidence to show as to how this undervaluation would have resulted in any commercial benefit to the appellant. Since the both units share a common balance sheet at the end of the Financial Year and the Excise Duty paid by the appellant is available as eligible Cenvat Credit at the end of the receiving unit, the situation is that of Revenue neutral. Hence, the confirmed demand of Rs.1,42,845/- set aside. Time limitation - HELD THAT:- The Revenue has not brought in any evidene to the effect that the appellants have indulged in suppression with an intent to evade. Therefore, the confirmed demand in respect of extended period is hit by time bar provisions. Accordingly, the order to this extent set aside even on account of time bar. Penalty on Managing Director - HELD THAT:- Since the confirmed demand is not sustainable on merits and on account of limitations, the penalty imposed on the Managing Director also does not sustain. Hence, the penalty imposed on him do not sustain. Conclusion - i) The demands based on theoretical input/output ratios without corroborative evidence are unsustainable. ii) The lack of evidence for clandestine manufacture and removal led to the dismissal of the demand. iii) The demand was also barred by the limitation period as there was no suppression of facts by the appellant. iv) The penalty on the Managing Director was set aside due to the unsustainability of the primary demand. The Appeals stand allowed on merits and on account of time bar.

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• 2025 (2) TMI 476
  Invocation of Extended period of limitation - wrongful availment of CENVAT Credit - HELD THAT:- The fact that the alleged wrong availment was discovered during audit only means that the officer responsible to scrutinise the returns had not done his job. Otherwise, what was discovered by the audit could have as well been discovered by the officer. Thus the sole ground on which the extended period of limitation has been invoked is effectively that the assessing officer had not done his job. If the assessing officer did not do his job, it does not mean that the assessee has suppressed anything willfully or mis-stated. The demand and penalty cannot be sustained on the ground of limitation itself. There is no need to examine the merits of the case as the entire demand is time barred. Conclusion - The assessing officer s failure to scrutinize the returns properly did not constitute willful suppression by the appellant. Appeal allowed.

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• CST, VAT & Sales Tax

• 2025 (2) TMI 475
  Revision of assessments of the assessee-respondent made for the assessment years 2002-2003 to 2004-2005 - refund the exempted portion of the tax as per the provision of Package Scheme of Incentives 1993 on the sale of goods effected in the course of inter-State trade or commerce - HELD THAT:- The State Government though continues to have the power in public interest to grant exemption/partial exemption of tax on inter- State sale, trade or commerce but the same is subject to fulfilment of the requirements laid down under Sub-Section (4) of Section 8 of the CST Act which means that henceforth the exemption so granted would be admissible only if Form C and D are supplied by the dealer in context with the aforesaid interstate sale, trade and commerce. The absolute power initially conferred under Section 8(5) upon the State Government to grant exemption/partial exemption of tax in connection with inter-State sale, trade or commerce with the amendment was circumscribed and restricted to the fulfilment of the requirement of Section 8(4) of the CST Act which prescribes for the submission of Form C and D only w.e.f. 11.05.2002. However, such restrictions are prospective in nature and would not apply retrospectively to cases where absolute exemption was permitted much prior to the amendment. In the instant case, the assessee-respondent was granted tax benefits under the PSI 1993 issued in exercise of power under Section 8(5) of the CST Act as per the eligibility and entitlement certificates dated 20.02.1998 and 24.03.1998 respectively and that said benefit was available to the assessee-respondent up to the period of 2012 or to the extent of Rs.273.54 crore, whichever was earlier. The said benefit granted to the assessee-respondent was not with any restriction, much less the condition of submission of Form C and D . Thus, on the basis of such exemption granted by the petitioner vide Eligibility Certificate dated 20.02.1998 and Entitlement Certificate dated 24.03.1998, a substantive right had accrued to the respondent to claim the said benefit up to the year 2012 or to the extent of Rs.273.54 crore - in view of the amendment of Section 8(5) by the Finance Act, 2002, the State Government ceases to have power to grant exemption in respect of sale of goods covered under Section 8(2) but that is not the issue herein. The precise issue in the present case is whether the aforesaid amendment would take away the right which had accrued to the assessee-respondent under the Eligibility/Entitlement certificates wherein absolute exemptions were granted without any condition of submission of Form C and D . In the case at hand, the assessee-respondent was held eligible for absolute exemption under the PSI 1993 issued in exercise of power under Section 8(5) of the CST Act as per Eligibility certificate dated 20.02.1998 and Entitlement certificate dated 24.03.1998 granting exemption to it from payment of tax under the BST Act and CST Act to the extent of Rs. 273.54 crore or up till 2012, whichever is earlier. The said exemption granted to the assessee-respondent was much prior to the enforcement of the Finance Act, 2002 with effect from 11.05.2002. Therefore, by virtue of the unamended Section 8(5) and the Notification issued thereunder as well as under the aforesaid Eligibility and Entitlement certificates, a substantive right of exemption from payment of tax had accrued to the assessee-respondent - The requirement for fulfilling the condition of Section 8(4) of the CST Act for getting the benefit of tax exemption came subsequently after the amendment of Section 8(5) with effect from 11.05.2002 and would apply prospectively to transactions in respect of which eligibility and entitlement certificates are issued subsequently. Conclusion - The State Government was not competent to issue the impugned notices for revising the assessment of the assessee-respondent and to demand the exempted tax only for the reason that the assessee-respondent has not submitted Form C and D in support of inter-State sale, trade commerce. The requirement of submission of Form C and D would apply prospectively after 11.05.2002 i.e., after the Finance Act of 2002. The appeal lacks merit and hence dismissed.

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• 2025 (2) TMI 474
  Dismissal of second appeal - Denial of entire input tax credit and special rebate claimed - absence of any separate account, for raw materials traceable to products transferred outside the state, maintained by the assessee - HELD THAT:- It is found that inasmuch as the Tribunal has merely accepted the findings of the First Appellate Authority on facts that were not disputed by the State in the appeals before the Tribunal, there is no substantial question of law that arises for consideration in these OT. Revision petitions. The subjective satisfaction arrived at by the First Appellate Authority, based on records and data produced before him, would suffice to hold that the revenue has not made out a case warranting interference with the impugned order of the Tribunal. Conclusion - The revenue did not establish a case warranting interference with the Tribunal s order, leading to the dismissal of the OT. These OT. Revisions are dismissed.

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• 2025 (2) TMI 473
  Addition of sale turnover by relying on the income disclosed under the head Income from Other Sources / Other Income in the trading profit and loss account for the relevant assessment year - estimating the sales turnover for the purpose of assessment under the Kerala Value Added Tax Act - estimating the sales turnover from the income disclosed under the head Income from Other Source in the trading profit and loss account, without any independent finding - estimating the sale turnover by adopting the turnover at 8% as gross profit as the benchmark without any comparable data - benefit of the sub clause (3) of Section 25AA of the KVAT Act - HELD THAT:- Section 25 (1) of the Kerala Value Added Tax Act, 2003 prescribes the power of the assessing authority to complete the assessment on best judgment basis, if it is found that any income has escaped the assessment. It is now trite law that even when an intelligence officer initiates proceedings for penalty under Section 67 of the KVAT Act and finalises a report, the said report cannot form the basis of reopening of the assessment. The above principle equally applies to the proceedings initiated under Section 25. The assessing officer is bound to conduct an independent enquiry as regards the materials available, which according to him requires reopening of the assessment or completing the assessment on a best judgment basis. The assessing officer proceeded clearly on an assumption, which is impermissible under the scheme of the Act. The infirmity which had crept into the assessment order was not considered in proper perspective by the first appellate authority as well as by the appellate tribunal. Conclusion - None of the authorities have considered the case in hand in its true perspective and applied the law correctly. Thus, the order of assessment as confirmed by the first appellate authority and the tribunal cannot be sustained. The O.T. Revision is allowed by setting aside the order of assessment dated 17.10.2017 as confirmed by the first appellate authority as well as by the tribunal and answering the questions of law in favour of the assessee and against the Revenue.

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• 2025 (2) TMI 472
  Disallowance of input tax credit claimed by the Respondent on purchases effected from dealers who had failed to discharge their tax liability on such sales - disallowance of input tax credit claimed by the Respondent, despite the fact that the Respondent had utterly failed to discharge his burden of proving the correctness and genuineness of such claim - levy of penalty under Section 70(2)(a) of the KVAT Act - HELD THAT:- The Revenue officials have power to investigate and for that, they can summon any person as witness or otherwise cannot be gainfully disputed. The Assessment Officer having undertaken the investigation has formed an opinion as to there being a clandestine case of Bill Trading with the connivance. Once such an opinion is available in the very Assessment Order, it was open to the Assessee to dispel/dilute the same by producing evidentiary material. In fact, he had undertaken in writing to bring the representative of dealers to depose in his favour - No explanation is offered why he did not avail that facility. To this needs to be added one militant fact that the selling dealers enumerated in the Reassessment Order have not deposited the tax component claimed to have been paid by the Respondent Assessee on its purchase of goods. The goods in question were copper/GI strips, sheets, patties, plates wires. How such heavy things could have been transported in two-wheelers three wheelers, remains to be a mystery wrapped in enigma. The reasoning of the Tribunal that in only one instance of transports, Kinetic Honda two-wheeler was used and other vehicles were autos/trucks, does not make much sense. If a dealer does not offer explanation as to why he militantly lied even in respect of one single vehicle, that would cast shadow on the truthfulness of his other statements. We hasten to add that we are not invoking the maxim falses in uno, falses omnibus i.e., proof of falsity in one thing raises a strong presumption of falsity in everything - There is force in the submission of learned AGA that the version of officials of the Tax Department, founded on evidentiary material as to the unscrupulous transactions cannot be lightly interfered for askance. Therefore, the Tribunal is not justified in upsetting the findings recorded by the Assessing Authority. Even the First Appellate Authority committed an error in upsetting the levy of penalty inasmuch as, there was absolutely no material warranting the same. Penalty - HELD THAT:- The Tribunal was swayed away by the documents such as purchase sale invoices, statement of accounts, purchase sale register extract coupled with copies of cheques, it missed a very two important factors i.e., the requirement of proof of movement of goods, especially when the Revenue had pleaded that the tax component had not reached the Public Exchequer. Lastly, it needs to be stated that there are no basis on which the First Appellate Authority could quash the Penalty Order u/s.70 (2) of the Act. Conclusion - i) The burden of proof lies with the dealer claiming input tax credit and that mere production of invoices or payment by cheques is not sufficient to discharge this burden. ii) The Tribunal is not justified in upsetting the findings recorded by the Assessing Authority. Even the First Appellate Authority committed an error in upsetting the levy of penalty inasmuch as, there was absolutely no material warranting the same. The impugned order of the Tribunal is set at naught in its entirety - appeal of revenue allowed.

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• 2025 (2) TMI 471
  Challenge to Assessment Order revised by the Additional Commissioner of Commercial Taxes - HELD THAT:- It is not inclined to grant interference in the matter inasmuch as the question as to revisability of Assessment Order of the kind is no longer res integra. In KIRLOSKAR POWER SUPPLY CO. LTD. VERSUS STATE OF KARNATAKA [ 2006 (6) TMI 490 - KARNATAKA HIGH COURT] , it is observed Jurisdiction is clearly defined under section 15 of the Act. In the case on hand, it is seen that the Additional Commissioner has rightly invoked his power under section 15 of the Act for the purpose of revising the order passed by the Joint Commissioner. However, while passing the final order he has chosen to set aside the subsequent assessment order passed by the assessing authority. This could not have been done by him in terms of section 15 of the Act. It is difficult to countenance the contention of learned AGA that the expression any proceedings employed in Section 15 would include the order of the Commercial Tax officer and therefore, the impugned order is sustainable. Appeal allowed.

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